To take the limit to Rs 3,500 crore.
UB Holdings Ltd (UBHL), the Vijay Mallya-owned holding company, which holds the three main group companies — United Breweries, United Spirits and Kingfisher Airlines — is set to raise its borrowing powers by another Rs 1,000 crore and take the limit up to Rs 3,500 crore. It already has leveraged by 1.5 times.
The company, which has a debt of Rs 2,400 crore on a net worth Rs 1,600 crore, was recently in the eye of a storm after a research report from Canada said "the company was on thin ice" due to heavy pledging of its holdings as guarantee for Kingfisher Airlines and the flagship spirits business, United Spirits. The promoters hold a little over 50 per cent stake in UBHL, of which, around 16 per cent has been pledged to raise various resources.
In a recent meeting with shareholders, Mallya refuted this and said the company was on a solid footing and as part of its strategy, it had to borrow and provide guarantees. On Monday, UB Holdings announced it had pledged an additional nine million shares from its holding in one of its group companies — Mangalore Chemicals & Fertilizers. With this fresh pledging of shares, of the total promoter holding of 30.44 per cent, 85.94 per cent has been pledged from the earlier 63.72 per cent.
Kingfisher Airlines, which has been the major cause for ballooning debt with cascading effects at the UB Group, has been consistently supported through direct investment, advances from holding company, guarantees from the holding company and also by securing third party funds to meet exigencies.
The airline, currently is under a debt of Rs 6,000 crore on a negative networth and has accumulated losses of Rs 5,000 crore.
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The total investment by UBHL, till date, in the form of shares is Rs 2,118 crore. This includes a sum of Rs 745 crore, which was converted, along with the banks, into preference shares and, thereafter, into ordinary equity shares at the Securities and Exchange Board of India specified price. Besides this, UBHL has also procured third party finances from associates by way of optionally convertible debentures amounting to Rs 710 crore. It has provided Kingfisher with corporate guarantees totalling Rs 9,135 crore.
"Each of these primary obligations is supported, in the first instance, by Kingfisher’s assets and cash flows. UBHL guarantees are by way of additional collateral to further strengthen the promoters' commitments," Mallya noted. He said a realistic estimation of UBHL’s total assets, both quoted and unquoted (carried in the balance sheet at cost) would exceed Rs 12,000 crore.
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