Liquor baron Vijay Mallya is acquiring 50 lakh equity shares in United Breweries Ltd, which will raise his total equity holding to 17.9 per cent in the company's enhanced paid-up capital of Rs 40.37 crore.
Mallya now holds 6.39 per cent in the current paid-up equity of UB, which stands at Rs 35.37 crore.
Mallya is increasing his holding in UB through acquisition of 50 lakh convertible warrants from McDowell & Company Ltd, a promoter group company of UB, and their conversion into as many equity shares at Rs 34 each.
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McDowell, also controlled by Mallya, now holds 2.5 crore warrants issued by UB in 1994 at a price of Re 1 each allotted on June 21, 1994. Shareholder's approval for the allotment was accorded at the company's extraordinary general meeting on March 28 in the same year. Each warrant is convertible into one equity share at an additional price of Rs 34.
Mallya has already acquired 38,35,000 of the convertible warrants from McDowell and is set to acquire 11,65,000 more following a clarification from the Reserve Bank of India that the ceiling of 24 per cent applies only to portfolio investments, that is, purchases through stock exchanges and did not apply to the purchases of warrants by Mallya, which would be a direct investment with specific approval.
Attempts by Business Standard to obtain the comments of the UB brass on the issue proved futile as, according to an official statement of the company, the top rung of UB is travelling.
Mallya had earlier stalled his acquisition at 38,35,000 warrants as UB was under the impression that there was a cap of 24 per cent for all non-resident holdings including portfolio investments by foreign institutional investors and other overseas corporate bodies.
UB has now submitted an application before the Foreign Investment Promotion Board seeking permission for the transfer of the remaining tranche of warrants to Mallya. The whole process of the warrants changing hands is being seen as a transfer from one promoter to another. However, FIPB has decided to put on hold all proposals related to liquor companies.
The application is accompanied by a board resolution of the company dated July 24, 1996, approving the proposed transfer of up to 50 lakh convertible warrants to Mallya.
UB Ltd has reported a 58 per cent rise in net profit to Rs 4.7 crore for the first quarter of this year. Net sales, according to the company, showed a jump from Rs 98.17 crore from Rs 90.46 crore in the corresponding period last year. During 1997-98 it had posted a net profit of Rs 22.81 crore.
Gross profit too has increased in the first quarter of 1998-99 by 34 per cent to Rs 8.75 crore despite an increase of 31 per cent in interest charges to Rs 9.06 crore.
Though UB Ltd is not flush with funds, it has plans to launch UB Ice beer in Bangalore later this year and has in the recent past has launched Kalyani Black label Strong beer in Calcutta and UB Ice beer in Mumbai.
The company also claims that UB's recent associations with football through East Bengal Club, which it sponsors, has resulted in the rise of Kingfisher beer _- almost 500 per cent in Calcutta.
In recent times, Mallya , reportedly, had been holding talks with Kishore Chhabria for buying out the latter's stake in Herbertsons Ltd for a consideration of a reported sum of Rs 120 crore.
Chhabria and associates in Herbertsons Ltd hold about 46.9 per cent stake, while another 3.83 stake was refused to be transferred to Chhabria by the Herbertsons board saying its would amount to violation of Sebi guidelines.
Mallya, who has been attempting for few years to gain control of Herbertsons Ltd from Chhabria, holds about 25 per cent stake in the company, while his associates are said to have another r 14 per cent which, effectively, brings Mallya's holding in the company to 39 per cent _- still less than Chhabria's.