Vijay Mallya on Monday resigned as chairman of Mangalore Chemicals & Fertilizers Ltd (MCF). Separately, the Union Ministry of Corporate Affairs refused to clear his application for reappointment as Managing Director of the grounded Kingfisher Airlines, citing lack of lender and shareholder approval for the move.
In a filing with the stock exchanges, MCF said Mallya had resigned from the board of directors with immediate effect.
The MCF scrip reacted positively to Mallya’s resignation, breaching the upper circuit. During mid-trade, the stock shot up 15 per cent to end the day at ₹89.25, 9.32 per cent higher than its previous close.
As of now, Mallya remains the Chairman of United Spirits Ltd, United Breweries, UB Holdings and UB Engineering.
Sources inside the company say lenders may have forced Mallya to resign from the MCF board.
Poddar to the fore However, all may not be lost for the former liquor baron. He is expected to give way to his white knight, Zuari Agro’s Saroj Poddar, to manage the company. Poddar is likely to nominate his son, Akshay, to head MCF.
Together, Mallya and Zuari Agro hold slightly over 38 per of the company, while Deepak Fertilisers holds 32 per cent.
Sources in the lenders’ consortium say that had Mallya continued to head MCF, it might have been difficult for it to raise working capital from banks.
MCF is going through a tough period as it is unable to get natural gas to operate its urea plant, which has been shut for the last two months. The Centre has ended subsidies for urea producers using naphtha as feedstock. But it is yet to make natural gas available for the plant though Union Chemicals and Fertilisers Minister Ananth Kumar had assured MCF that its request would be fast-tracked.
Sources say that without the subsidy, MCF would have incurred a loss of ₹3 crore per day if operational.
Sources in the company said the management is also gradually reducing the number of contract workers to about 450, which is about half their earlier strength. MCF has around 950 permanent workers.
MCA rejection In a separate development, the Ministry of Corporate Affairs rejected Kingfisher Airlines’ application, made under Section 269 of the Companies Act, 1956, seeking the Central Government’s approval for the re-appointment of Mallya as Managing Director.
Kingfisher Airlines had sought to get Mallya reappointed for a five-year term, with effect from October 16, 2013, without remuneration.
The Ministry rejected the application as the airline had failed to get approval from lenders and shareholders for the reappointment. Any company that has posted losses and owes money to lenders is required to approach the ministry for appointment of key managers and also seek approval from lenders and shareholders.
The airline’s filing with the BSE, however, did not give details of the ministry’s decision.
Kingfisher Airlines stopped flying in October 2012 and has an accumulated loss of ₹16,000 crore and a negative worth of nearly ₹13,000 crore. It has never made a profit since its inception in May 2005.
Mallya is under pressure from a lender consortium led by the State Bank of India as well as the Centre’s Department of Financial Services for failing to repay loans to the tune of ₹7,500 crore. He has been declared a wilful defaulter by a few banks — something Mallya has contested in various courts.
This is the latest in a series of setbacks for the liquor baron. Last week, minority shareholders of United Spirits rejected a slew of special resolutions taken up at an extraordinary meeting, including one for approval of a loan agreement between the company and UB Holdings, and another for manufacturing, marketing and distribution of parent Diageo’s brands.