India: United Breweries may be pressured to force out Vijay Mallya from the board
The board of India's largest beverage maker United Breweries, owned jointly by Heineken and the beleaguered Vijay Mallya, has become edgy over the growing possibility of local lenders turning off the lending facility as a pressure tactic to force the erstwhile liquor baron to repay his dues, Economic Times reported on March 9.
A top official close to the development said in case banks send them an official communication, the board would be under pressure to seek an exit for Mallya from the board.
Mallya, who sold roughly 35% to Heineken in late 2000, is chairman of the board with representatives from the Belgium beverage maker.
"Mallya has not defaulted on any United Breweries loans so there is no reason to ask him to go now," said a senior board official. "But SBI and Yes Bank are among our major lenders and if they take a decision on UB, we will have to move fast on that."
A covenant in the loan agreements with the companies to which the banks have funded says the borrowing company should not induct on its board a person whose name appears in the list of wilful defaulters and that in case such a person is found to be on its board, it would take expeditious and effective steps for his removal.
Lenders are also considering an option to sell the pledged United Breweries' shares with them to recover the dues from Mallya. ''One of the options we are considering is to sell the UB shares and recover the money," said a local lender. ''What we are worried is that though we have a lien over the international assets, it may have been ring fenced by now."
United Breweries shares ended at Rs 806.20 per share on the BSE, up 0.07%. At March 8 market closing prices the company's market value stood at Rs 21,316 crore. Mallya owns 32.29% stake in the company valued at Rs 6,883 crore.
In 2015, local lender Yes Bank had invoked 3.02% of UB, pledged by McDowell Holdings, a company owned by Mallya, by selling shares worth Rs 778 crore to recover the dues.
Mallya had pledged 47.68% of the UB shares owned through different entities to lenders, according to the information provided by United Breweries to the Bombay Stock Exchange ending Quarter 2015. Among others, Mallya had pledged 98.11% of the 8% stake he owned in UB and Mcdowell Holdings 82.68% of the stake.
India's largest lender by assets State Bank of India along with consortium of banks had served notice to Mallya, defunct Kingfisher Airlines and his holding company United Breweries Holdings as wilful defaulters for not repaying Rs 7,000 crore loans.
Mallya and his family members own 34.04% stake in United Breweries through a web of companies, while Heineken is largest shareholder with 43%. Some lenders have sold the shares of UB to recover loans.
In November 2015, Yes Bank sold 4.25 lakh shares of UB to Heineken International BV Rs 39.48 crore through block trades on the stock exchange.
Mallya may be in a spot as Heineken has the right to increase its stake by 5% through creeping acquisition, which allows Indian promoters to purchase up to 5% from the open market.
09 March, 2016
