‘USL debtors went back on promise to pay up, post acquisition by Diageo’

United Spirits Ltd (USL) has said that its debtors had promised to return the amount they owed to the company at the time of the due-diligence undertaken by parent Diageo.

USL Chairman MK Sharma said Diageo went ahead with the acquisition of USL believing the debtors. “At that point in time, they had confirmations. The change occurred after Diageo came in pursuant to the due-diligence believing that they were good assets. At that time, they started saying that we gave it to him… we advanced money to Kingfisher Airlines, unless Kingfisher returns, we won’t return it to you. Those kind of issues arose subsequent to due diligence. Then we instituted a probe, and reported the findings,” Sharma said.

He said Diageo carried out the due-diligence as they wanted to secure for themselves what they were buying was a good asset. “They could as well have not done any due diligence. The quality of the due diligence done may have left something to be desired but the fact of the matter is they did,” he pointed out.

He added that USL tried its best to recover the money but those it could not were written off. “These are large distributors holding monopoly positions in their respective markets. We had to balance the need for recovery with the counterbalancing reason to maintain continuity of the business.”

Sharma said USL managed to recover about ₹54 crore. The balance worth about ₹500 crore was written off.

Unlike past AGMs which was presided over by Vijay Mallya and the shareholders hardly asked “inconvenient questions,’’ the new management had to face a barrage of them from some of the shareholders. The questions ranged from how some of them had not received the annual report to issues concerning due diligence.

One of the shareholders asked the Chairman to find a way out so that former chairman Vijay Mallya could return and pay off all the lenders.

He said that Mallya had made significant contribution for the success of the company, and hence, United Spirits should make efforts to get him back.

Another shareholder pointed out that for the last 12 years, the company had not paid dividends, to which the chairman said that it can be paid only when the accumulated losses are fully wiped out. Only six directors were present at the AGM, which was another first for a United Spirits’ AGM.

Earlier, most of the resolutions were decided on the basis of raising of hands which was done away with this time. Two ballot boxes were kept for the shareholders to cast their vote.

Sharma, who was on the board of HUL earlier, said the new auditors, PwC were being appointed in place of BSR/KPMG to do away with the duplication of certain audit processes. He also said parent Diageo too had appointed PwC as its auditors and this will help USL as well.