There is a possibility of the annual general meeting of United Spirits, controlled by Diageo, being delayed due to the impasse between the multinational and Vijay Mallya, who is the Chairman of United Spirits, over review of the shareholders’ agreement.
Assuming the AGM is called now, Diageo has no option but to allow Mallya, in whom it has “lost confidence”, to chair the meeting — something that it would not want.
United Breweries and UB Holdings have called their AGMs for September 22 and September 28, respectively. The usual practice has been to hold the AGM of United Spirits along with that of the other two companies.
Significantly, Diageo's CEO Ivan Menezes is expected to visit India next week as part of a UK trade delegation. In April, Diageo said it will review the shareholders' agreement after the United Spirits board said it had lost confidence in Mallya and asked him to resign as its chairman as well as from the board following an internal probe report which said the Indian liquor maker's funds were diverted to other UB group companies.
A spokesperson for Diageo said that no fresh developments have taken place regarding the shareholders’ agreement. “There is no update to share from Diageo and our statement remains the same,” the spokesperson said. Mallya did not respond to a query whether he has agreed for a review.
It also remains to be seen whether the board can move a resolution seeking shareholders' approval to oust Mallya from the board.
Diageo's stake in USL is now about 55 per cent, which it has acquired for $3 billion. Mallya owns as little as 0.01 per cent in his personal capacity, while a few of his UB Group entities hold about 4 per cent stake.
As per the internal probe report which was submitted to the USL board on April 24, between 2010 and 2013, about ₹1,337 crore was diverted from United Spirits to certain UB group companies, particularly Kingfisher Airlines.
The probe report said the manner in which certain transactions were conducted prima facie indicated improprieties and legal violations.
A spokesperson for InGovern, a proxy advisory firm, said that there will be an “uneasy calm,’’ when the AGM presided over by Mallya is held.
He said it is up to Mallya to decide whether he wants the share purchase agreement with Diageo to be revised.
“The ball is in Mallya’s court. It is a very, very tricky situation for both Diageo as well as for United Spirits,” said Shriram Subramanian, Managing Director for InGovern.