Three Years On, United Spirits Still Grappling With Mallya’s Legacy And Investigative Agencies

• Five regulators are probing various deals
• United Spirits to not sell any more property to Vijay Mallya
• Diageo Plc had acquired United Spirits from Vijay Mallya in 2014

Diageo Plc-controlled United Spirits Ltd. has almost every investigating and regulatory agency in the country probing the company, even three years after taking control from Vijay Mallya's UB Group.

Five agencies, including the Central Bureau of Investigation, are probing financial deals, agreements and a $75-million settlement with Mallya, the maker of McDowell's and Royal Challenge whiskies disclosed in its earnings statement.

Mallya's own troubles have mounted after his now-defunct Kingfisher Airlines defaulted on loans worth Rs 1,100 crore. He faces probes from multiple regulators and the Indian government has initiated proceedings to seek his extradition from the U.K.

Also Read: Extradition Is Coming: How One Case Got Vijay Mallya On The Hook

Diageo took control of USL in July 2014 after acquiring stake from Mallya and through an open offer over two years for Rs 18,000 crore or $3 billion. After completing the deal, the new management ordered a forensic audit and inquiries into accounting irregularities and loans to Mallya group entities.

The company initiated recovery proceedings in January this year against PA Murali, former executive director and chief financial officer, who resigned in April 2015, its statement said. USL is looking to recover Rs 13.4 crore in excess remuneration paid to Murali for 2014-15. It has filed a suit in the jurisdictional court, the company said.

Though Murali's remuneration was approved by shareholders, the company had sought government approval as it was in excess of the compensation allowed under the provisions of Schedule V of the Companies Act, 2013.

Schedule V relates to managerial pay at companies where net worth has eroded in the previous financial year. USL's net worth fell by more than half after it posted a loss of Rs 4,489 crore in 2013-14, largely on the back of Whyte & Mackay writedown and financial irregularities it found in the forensic audit.

Most of the probes by government agencies stem from the forensic audit and USL's parent Diageo's $75-million settlement with Mallya in March 2016 to make him step down as chairman. As part of settlement, USL had paid Mallya $40 million upfront. Here's a list of probes against USL…

Not To Sell USL Properties to Mallya

As part of the settlement, USL had agreed to sell up to 13 non-core assets, mostly residential properties, to Mallya or a party nominated by him. Mallya wanted to buy four of these.

The company disclosed that “the call notices have expired and as a result the period for exercising this option has also expired. The company now plans to sell these non-core properties at market value”.

USL plans to raise up to Rs 2,000 crore from the sale of non-core assets in the next three to four years, the company told analysts on Wednesday. These would be through sale of residential and commercial properties, and rights to shares held under pledge with banks.