Funds may be used partly to pay off Kingfisher Airlines debts
The UK-based Diageo plc is expected to pick up to 27 per cent stake in liquor baron Vijay Mallya’s United Spirits (USL) for a total amount of Rs 3,000 crore ($640 million).
Sources indicated that the stake sale is expected to be finalised in London early next week with an official announcement likely at the end of the month when the USL board meets in Bangalore.
It was not immediately clear as to how much of the personal stake of promoter Vijay Mallya will be disposed of as part of the stake sale.
Sources indicated that funds raised will be used to pay off debts which have his personal guarantee, especially the ones extended to Kingfisher Airlines. The eventual sale could provide a much needed financial lifeline to the cash-strapped airline.
A consortium of banks which extended loans of Rs 7,000 crore to the airline is learnt to have told the management that if it needs fresh infusion of funds, then it should raise at least half of the Rs 2,200 crore it needs immediately to stay afloat.
Last week, Diageo plc held a management committee meeting in Singapore which was expected to last three days.
But it was cut short by a day and senior officials of the company dashed back to London for a series of meetings with their counterpart in USL, including its Chief Financial Officer and Joint President P.A. Murali.
Team in Bangalore
Sources said that for the past few days a team of six people, including attorneys and officials from Diageo, and auditing firms have been interacting with USL teams in Bangalore.
Though Diageo and USL have been in talks for the past two years, this time the trigger for going ahead with the stake sale is the Government dragging its feet on allowing foreign direct investment into the domestic airline sector.
The USL share was quoted at Rs 975.85, down Rs 3.40, at close on the BSE on Friday.