India: Vijay Mallya rejects formal plea to resign as United Breweries chairman

Vijay Mallya has rejected a formal plea from United Breweries, India’s largest beer company, to resign as chairman saying he has no intention of stepping down and will instead challenge a regulatory order to do so in court, the Financial Times reported on February 9.

Mr Mallya’s defiance creates an uncomfortable situation for United Breweries’ largest shareholder, Heineken. The Dutch brewer now finds its lucrative Indian business caught between the country’s regulatory authorities and its joint venture partner that is a target of national opprobrium.

Mr Mallya hit back over United Breweries on February 9, the same day that New Delhi filed a formal request with the British government for his extradition from the UK to India, where he faces prosecution for criminal offences connected to a $134m loan granted in 2009 to his now defunct Kingfisher Airlines.

The erstwhile liquor baron, once labelled the “King of Good Times”, had been a popular icon of consumerism in India. But he became a target of anger after the collapse of Kingfisher Airlines left a mountain of debt and thousands of employees unpaid.

United Breweries, founded by Mr Mallya’s father, is 43 per cent owned by Heineken, and 30 per cent owned by Mr Mallya and his personal holding companies. Mr Mallya’s partnership agreement with Heineken says he will serve as chairman of United Breweries, and that his son, Siddharth, will succeed him.

But the Securities and Exchange Board of India last month banned Mr Mallya from holding any directorships or senior management positions in publicly listed companies, citing allegations of fund diversions from United Spirits, his former drinks company that is now owned by UK distiller Diageo.

Asked by the Bombay Stock Exchange about the status of its compliance with SEBI’s order this week, United Breweries said it had emailed Mr Mallya, pleading with him to resign as chairman.

But the Indian tycoon told the Financial Times he would not go. Mr Mallya said he would instead appeal the ban as he has had no opportunity to defend himself against the allegations, which he has always denied.

“Wait until I exhaust my legal remedies,” Mr Mallya told the FT in a telephone interview from London, where he has been grounded since the cancellation of his Indian passport last year.

Mr Mallya also rejected suggestions that his stance could invite regulators’ wrath — and even retaliation — against United Breweries, or its shareholders.

“The [SEBI] order is against me, not against the company,” he said. “The onus of compliance is on me. UB has done their duty. How can UB be held responsible?”

Amit Tandon, managing director of the Institutional Investment Advisory Services, a proxy advisory firm, said Heineken must deal firmly with Mr Mallya, and find a way to squeeze him out.

“It’s time for Heineken to get tough,” says Mr Tandon. “They’ve had a good relationship, but they need to say his continuing on the board is not good for the company and therefore he should go.”

He added: “If this was in their home market, they wouldn’t take all this. They’d say ‘off with his head’ and we’ll bear the consequences.”

Heineken said in a statement: “We hope that the situation that Mr Mallya finds himself in is resolved in accordance with law.”

Mr Mallya spent much of 2015 in a bitter stand-off with Diageo, which paid nearly £1.8 bln for a controlling stake in United Spirits, over his role as chairman.

While the sale agreement specified that Mr Mallya remain in place as chairman of United Spirits, Diageo in April 2015 demanded his resignation, due to its concerns over the past diversion of funds from the company.

Mr Mallya refused to step down until 10 months later, when Diageo agreed to pay him a $75 mln golden handshake.

09 February, 2017