 "Vijay Mallya")
United Breweries Holdings (UBHL)'s shares fell 3.6 per cent on Monday following the Central Bureau of Investigation (CBI)'s search operation on UB group chairman Vijay Mallya's offices and residences and on IDBI Bank on Saturday. The CBI is investigating IDBI Bank's Rs 900-crore loan to Kingfisher Airlines, made after the airline's financial metrics collapsed in 2012.
On Monday, UBHL shares closed at Rs 22.75 apiece. The scrip is down 12.5 per cent in the past year. Following the drop in its share price, UBHL's market value has shrunk to Rs 150 crore on Monday. CBI is expected to interrogate top officials of IDBI Bank and other government-owned banks, which lent Rs 7,000 crore to the now-defunct airline. The airline shut shop in October 2012 following defaults on employees' salaries, taxes and even provident fund.
Apart from lending money in April 2011, a host of public sector banks, including IDBI Bank and State Bank of India, converted loans worth Rs 750 crore to equity at a high premium of Rs 64 a share even though the then share price was only Rs 39.90.
CBI's raid comes at a time when the UB group is facing charges of diversion of funds from British liquor giant Diageo from United Spirits. Diageo took over United Spirits in 2012 only to discover the company has lent close to Rs 2,100 crore to Kingfisher Airlines and other UB group entities. Diageo even sought a probe by the Indian regulators and asked Mallya to step down from United Spirits as chairman in April this year, but Mallya has refused to do so.
In yet another brewing trouble for UBHL, its auditor has raised serious concerns over Rs 8,707 crore of corporate guarantees extended by the holding company to the lenders of Kingfisher Airlines. The auditor warned the liabilities of UBHL will rise by Rs 7,730 crore because it has not accounted for several disputed liabilities of the company in its annual accounts. In a report for UB Holdings for 2014-15, auditor S Vishnumurthy of Vishhnu Ram & Co said the corporate guarantees had been invoked by the lenders, who were pursuing recovery actions against the company.
Mallya's woes are likely to go up as another important legal matter is pending before the Supreme Court on an investigation ordered by the Karnataka High Court. In December 2013, the Karnataka High Court had made scathing comments on United Spirits' diversion of Rs 4,000 crore to the tax haven of British Virgin Islands before the sale of the company to Diageo and said the fund diversion needs to be investigated.
While setting aside the sale of seven per cent United Spirits stake to Diageo by UB group, the high court had said that without investigations of serious allegations made by the lenders attacking the open offer transaction in question, the company judge had granted permission, which is not proper. The company judge was dealing with the public announcement of Diageo's open offer for United Spirits.
UB told the company judge that these funds were diverted for payment of the acquisition of Whyte & Mackay. But lenders argued there were no supporting documents to show why such a valuation asset is parked in a tax haven. Since then, the new owner of United Spirits, Diageo has sold off Whyte & Mackay even as a suit is pending in the Supreme Court.
