United Bank of India’s decision to declare Vijay Mallya, Chairman of the UB Group, a “wilful defaulter” could bring radical changes in the ownership battle over the group’s Mangalore Chemicals & Fertilizers (MCF), according to market experts.
Till now, Mallya was striving to protect the company from the acquisition bid by the Pune-based Deepak Fertilisers and Petrochemicals Corporation. Deepak picked up a 25 per cent stake in the company, and is now awaiting regulatory approvals to go for the final kill through an open offer.
In response, Mallya tied up with Saroj Poddar-controlled Zuari Fertilisers and Chemicals in May this year to put up a combined show and retain control over MCF.
According to their agreement, Poddar would chip in funds to rival Deepak’s offer, while Mallya will retain management control as Chairman for five years.
At present, Mallya has 22 per cent holding in MCF. By declaring him a “wilful defaulter” for the grounded Kingfisher Airline’s failure to repay its debts, the Kolkata-based United Bank has jeopardised this arrangement.
First, it ensures that Mallya cannot be on board of any company, including MCF. Naturally the existing agreement between Mallya and Poddar may no longer be valid.
Second, the lender’s stricture may force market regulator SEBI to recall its permission to the Zuari-UB combine to float an open offer. United Bank Executive Director Deepak Narang confirms that the bank has alerted SEBI on the issue. More importantly, other lenders which have exposure to Kingfisher may follow suit to recover their dues from UB.
“There are nearly one and a half dozen banks in the consortium with total exposure to the tune of ₹4,000 crore,” a banker told BusinessLine, adding that “every bank will now move ahead in declaring Mallya a wilful defaulter.”
And, that means serious financial trouble for the UB group. There is only one way for him to get out of it, selling some of his assets. MCF is one such asset.