Mallya ready to smoke the peace pipe with banks

A source close to the UB group said Mallya was willing to settle with the public-sector banks by selling part of his stake in various companies and assets based in India and abroad.

In a major relief for Indian banks, Vijay Mallya, chairman of the beleaguered UB group, wants to settle his dues with banks and plans to initiate formal negotiations in the next few weeks.

Mallya’s willingness to settle the dues comes after the Central Bureau of Investigation stepped up efforts to investigate a Rs 950-crore (Rs 9.5-billion) loan given by IDBI Bank to the now-collapsed Kingfisher Airlines.

The airline, which shut shop in 2012, owed Indian banks Rs 7,000 crore (Rs 70 billion) as of January this year.

A source close to the UB group said Mallya was willing to settle with the public-sector banks by selling part of his stake in various companies and assets based in India and abroad.

As reported on November 10, the UB group is likely to sell Rs 2,200-crore (Rs 22-billion) worth of its residual four per cent stake in United Spirits Ltd, to part-repay the loans.

Mallya also owns a 32.62 per cent stake, worth Rs 8,500 crore (Rs 85 billion), in United Breweries.

Of this, Rs 4,411-crore (Rs 44.11-billion)-worth of his United Breweries stake is unpledged.

Dutch beer giant Heineken owns a 42.3 per cent stake in United Breweries, India’s biggest beer company, after it bought a 3.21 per cent stake, worth Rs 872 crore (Rs 8.72 billion), from USL in July this year. Mallya will have to take banks into confidence before selling his stake, as part of his holding in his companies is pledged.

In October, the Central Bureau of Investigation had raided the UB group’s office and Mallya’s residence in Goa and Bengaluru, after the agency filed a first information report against Mallya, A Raghunathan (the then chief financial officer of the UB group), and unknown IDBI Bank officials.

During the raids to probe IDBI Bank’s loan, CBI had found that Mallya had defaulted to other banks as well.

A senior State Bank of India official said the bank had not received any formal proposal from Mallya as on Friday. When contacted, a spokesperson for the UB group declined to comment.

For Indian banks, any settlement will be welcome, given that they are running from pillar to post to get their money back and have moved various courts against Mallya.

On Saturday, lenders decided to auction some of Kingfisher’s assets, such as old cars and fork-lifts, with a reserve price of a measly Rs 65 lakh (Rs 6.5 million).

Soon after the airline shut down, Mallya in 2012 sold his stake in USL to the UK’s Diageo for close to $2.1 billion.

But the proceeds of the deal were not used to repay the banks, which were left holding the can.

The relations between Diageo and Mallya later soured over the Rs 2,100 crore (Rs 21 billion) dues from various UB firms to USL.

In April this year, the new USL board even asked Mallya to resign as the chairman, but a defiant Mallya refused to do so.  

A source said USL’s annual general meeting on November 24 will be crucial to see if and how the relations between Diageo and Mallya have deteriorated.

The source said Diageo and Mallya were also working on a peace plan, under which the latter will quit USL without any public fight, and the former will take full control of the company.

Diageo is also in talks to buy out Mallya’s four per cent stake in USL.

Image: Vijay Mallya. Photograph: Reuters

(With inputs from Anup Roy)