USL, United Breweries have to shell out $600 m to buy Mallya’s pledged shares

K Giriprakash Bengaluru | Updated on January 21, 2020

Vijay Mallya has said he can pay back all the loans if the curbs on the sale of his pledged shares are removed (file photo)   -  Bloomberg

United Spirits Ltd (USL) and United Breweries will have to spend a total of over $600 million to buy the pledged shares of Vijay Mallya and his holding company’s subsidiaries.

Earlier this month, a Special Prevention of Money Laundering Act (PMLA) court in Mumbai had allowed a consortium of 15 banks led by State Bank of India to utilise the moveable assets of the former liquor baron.

Vijay Mallya and his companies have a total 1.52 per cent stake in USL, of which 99,72,335 are pledged. In United Breweries, Mallya and related companies have an 11.04 per cent stake, of which 2.77 crore shares are pledged.

Diageo, which is the largest shareholder in USL, has a 55.24 per cent stake in the company while Dutch company Heineken and its related entities have 46.69 per cent stake in United Breweries.

While Heineken may want to increase its stake in United Breweries to take it past 50 per cent, Diageo is unlikely to do so soon because it already has an over 50 per cent stake in USL.

According to the SBI-led consortium of banks, Mallya and his associate companies owe ₹9,000 crore including interest on loans taken at various intervals to fund the operations of Kingfisher Airlines. Mallya has repeatedly said that he is willing to pay back all the loans if the courts remove restrictions on the sale of his pledged shares. However, there have been several claimants to Mallya’s pledged shares including aviation-related companies, private and public sector banks.

Both United Breweries and USL are set to announce their third-quarter results in the course of this month. The shares of United Breweries closed the day at ₹1,271.35, about 2.46 per cent lower than the previous day’s closing. USL’s shares were flat at ₹580.35 at the end of the trading session on Tuesday.

Sales slowdown

Of late, USL has been battling a slowdown in liquor sales across the country largely because of a consumption slowdown. For the second quarter this fiscal, it posted a 13 per cent drop in net profit to ₹225 crore on revenues of ₹7,295 crore, which were up 2.15 per cent.

United Breweries reported a 29.39 per cent decline in consolidated net profit to ₹114.78 crore during the same period. Total income grew 7.6 per cent to ₹3,589.6 crore.

Published on January 21, 2020

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