London-based Diageo moves to curtail Mallya’s clout in United Spirits

With Vijay Mallya’s United Breweries Holdings Ltd’s (UBHL) stake in United Spirits reduced to about 4 per cent, the new owner of the Indian liquor maker, London-based Diageo Plc, has decided to curtail the holding company’s influence.

In a statement on Wednesday, Diageo said UBHL will no longer be able to recommend any independent director on the United Spirits board following the reduction in its shareholding.

Diageo threw in other conditions as well. The statement said Diageo’s contractual obligations to support Mallya continuing as non-executive director and chairman of United Spirits will also depend on the “absence of certain defaults by UBHL or Mallya”.

It added UBHL remains entitled under the Shareholders Agreement to nominate one director to the United Spirits board subject to it continuing to hold at least 1,307,950 shares in the liquor company and Mallya continuing to control UBHL.

Because of these agreements, Diageo voted in favour of the resolution at the United Spirits’ annual general meeting (AGM) to reappoint Mallya as a director. Along with him, Anand Kripalu (CEO and Diageo-nominated director), Sudhakar Rao, D Sivanandhan and Indu Shahani (all as independent non-executive directors) were reappointed as directors on the board of United Spirits.

The following, who were not subject to appointment or reappointment at the United Spirits AGM, continue on the board: Paul Walsh (non-executive director nominated by Diageo), Ravi Rajagopal (non-executive director nominated by Diageo) and PA Murali (CFO and Diageo-nominated director).

Diageo is the majority shareholder in United Spirits with a 54.78 per cent stake. Hence, under the Shareholders Agreement, it can appoint its nominees to the roles of CEO and CFO of the company, as well as to nominate and recommend directors to its board.

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