Proxy advisory firm Institutional Investor Advisory Services (IIAS) has warned shareholders of United Spirits to vote against the reappointment of Chairman Vijay Mallya as director on the company’s board, ahead of the annual general meeting on September 30.

Fund-raising worry

As Mallya has been declared as a wilful defaulter by banks in connection with their lending to Kingfisher Airlines, it this might be an impediment in the way of further fund-raising exercise, the New Delhi-based advisory firm said. Mallya is facing 22 cases across various courts, banks and other financial institutions in this regard.

“According to an RBI circular, banks must not extend loans to companies where a director is considered a wilful defaulter. IIAS recognises that USL is a Diageo subsidiary, and can access funds from its parent company. However, this is not an optimum way of doing business. Until this matter is resolved, Mallya continuing on the board will constrain USL’s ability to raise debt from the Indian financial system,” it said in a report.

Besides Mallya’s appointment, IIAS has also opposed to a remuneration hike recommended for PA Murali, Director and CFO of USL from ₹4.2 crore to ₹12.8 crore a year. “PA Murali is answerable for the intra-group transactions for which USL has taken write-offs and provided for in its 2013-14 financial statement. Given that context, IIAS recommends that Murali step down from his directorship on the board,” the report said adding that it was higher than industry peers.

Early this month, the Supreme Court had refused to grant Mallya’s plea against State-run United Bank of India’s decision that declared him a wilful defaulter.

In a special leave petition filed through lawyer EC Agrawala, Kingfisher said the committee’s move was “arbitrary, unreasonable, untenable and unlawful.”

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