United Spirits board to probe all loans given to UB Group companies

Moneylife Digital Team 05 September 2014

Diageo controlled United Spirits made provisions of Rs1,012 crore due to doubtful loans given to UB group companies, leading to the company reporting a full year net loss of Rs4,488.8 crore

The board of United Spirits Ltd (USL), now controlled by Diageo, has ordered a probe into the loans given by the company to Vijay Mallya-led UB Group companies. These directions came as USL posted a widened net loss of Rs4,488.77 crore for the FY2014, mainly on higher provision due to the loans.

The company had reported a net loss of Rs105.03 crore in the fiscal ended March 2013.

USL made provisions of Rs1,012.75 crore for FY2014, due to ‘doubtful loans’ and exceptional items of Rs3,235.73 crore on the sale of Scottish subsidiary Whyte and Mackay.

While ordering the probe for a “detailed and expeditious enquiry on doubtful loans”, the company said: “The board has directed the Managing Director to engage independent advisors and specialists as required for the enquiry.

“Certain pre-existing loans/ deposits/ advances due to the company and its wholly-owned subsidiaries from United Breweries (Holdings) Ltd, which were in existence as on March 2013, have been taken into consideration in the consolidated annual accounts of the company drawn up as of that date.”

Pursuant to a previous resolution passed by the board on 11 October 2012, such dues (together with interest) aggregating to Rs1,337.40 crore were consolidated and recorded as an unsecured loan by way of an agreement between the company and UBHL,” the company said.

For the quarter ended March 2014, United Spirits reported standalone net sales of Rs1,916.95 as against Rs1,866.18 crore in the corresponding period a year ago. During the quarter to end-March, USL’s standalone net loss widened to Rs5,380.10 crore as against a net profit of Rs56.02 crore, same period last year.

The probe comes after UB Group Chairman Vijay Mallya was declared a wilful defaulter by State-owned United Bank of India. However, Mallya disagreed with the action of the lender and said he would pursue legal action.

“We were not given a hearing, we have not appeared before them, we disagree with their action and we shall pursue legal action,” Mallya told reporters after the annual general meeting of United Breweries.

The world’s largest spirits maker Diageo announced on 9 November 2012, that it will acquire 53.4% stake in United Spirits for Rs11,166.5 crore in a multi-structured deal.

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