India: United Breweries to drop its oldest global distributor

United Breweries, the maker of Heineken beer, will drop its oldest global distributor, Ultimate Branding Worldwide. The move comes in the wake of investigations by the Enforcement Directorate (ED) into a possible nexus with the former liquor baron Vijay Mallya following a whistle-blower complaint, the Economic Times reported on December 12.

The company will start exporting directly with the aid of its parent Heineken’s global distribution network, officials close to the development said.

According to sources, ED is investigating at least five companies in India and overseas for their alleged association with embattled liquor baron Vijay Mallya. The probe hasn’t so far found evidence to prove money was laundered to fund Mallya’s case. The ED is investigating if these were ‘dummy companies’ that were allegedly controlled by Mallya and profits accrued were used to fund his legal expenses.

“The ED officials have not got back to us on any further developments. We offered them as much information as they sought to investigate into the matter. But going ahead, we will build our own direct distribution into overseas markets with the support of Heineken,” a spokesperson for united Breweries, said.

Vijay Mallya did not respond to a mail on the subject.

Earlier reacting to a query sent by ET on ED’s probe, Mallya had said, “I have not had any contact whatsoever with Mr Shashikanth [Shashikant] for the past three years. I do not have any knowledge about his company Ultimate Branding Worldwide or its activities,” read his email reply.

“I have never even heard of Tammy International, Dubai and have absolutely no connection with this company. All my financial affairs including my sources of income and expenditure are fully disclosed before the English Courts in proceedings initiated by the consortium of banks. There is absolutely no question of any undisclosed sources of income. The English Court recently validated (approved) my living expenses and payment of legal fees after examining my proper income. Unfortunately, nonsense makes sensational headlines in India about me,” it added.

On July 24, the ED had raided Ultimate Branding Worldwide, run by Mallya’s former executive assistant V Shashikant, based on the complaint received by UBL forwarded to the probe agencies. Sources said the whistle-blower’s complaint claimed the said firm, an export agent of United Breweries (UBL), allegedly exported Kingfisher beer at a discounted price to Tammy International FZE in Sharjah allegedly owned by Shashikant’s close relative.

The overseas company, in turn, allegedly sold it at a premium to buyers in Singapore, the UAE, and Malaysia. The profit accrued through the sale was allegedly routed back to Mallya through a maze of shell companies. The overall funds suspected to be raised through this arrangement is estimated at over R200 crore, which was allegedly used to pay for Mallya’s legal expenses.

“The complaint alleged that a few domestic and offshore entities were floated which followed the same modus operandi of exporting Kingfisher beer at a discounted rate to their associated overseas company, which, in turn, sold the beer at a premium,” said one of the above cited persons. “However, at this stage not much has been found to strengthen the allegation levelled in the complaint. The investigation is still underway, he added.

V Shashikant told ET he was not aware of UBL’s decisions to go ahead with its own distribution system. “What can I say to it? ...It is a decision taken by UBL, which intends to tap Heineken’s global distribution chain. We have been their distributors for three years now,” he said. Shashikant, however, did not wish to comment on the ED’s probe.

12 December, 2019