United Spirits has provided for an additional amount of ₹995 crore in its balance sheet as UB Holdings is yet to return the loan it had taken from the company.
In its annual report, USL management said even the first instalment of the loan that works out to ₹191.10 crore due from UBHL has also not been received so far. “The company received a letter from UBHL stating that it is involved in litigations with various creditors of Kingfisher Airlines in different courts all over the country, and that some of the winding up petitions filed against UBHL have been admitted by the High Court of Karnataka.”
The annual report also states that the USL board has said that it has provided for an amount of ₹235.76 crore towards what it termed as transactions with additional parties following the internal enquiry report. “The board has directed the management to expeditiously review the additional matters and transactions with the ‘Additional Parties’ and report to the board conclusions on the transactions and any further impact on the company’s financial statements.”
The auditors, BSR & Co, noted that pending such a review, they are unable to comment on the nature of these transactions; the provisions established; or any further impact on the financial statements including the impact on the opening balances for the year.
The internal probe report, parts of which were disclosed in April this year, had said that funds were diverted to subsidiaries of UB Group companies, including the defunct Kingfisher Airlines. “The manner in which certain transactions were conducted, prima facie , indicates various improprieties and potential violations of provisions,” the report said. Based on the report, the board had asked its Chairman Vijay Mallya to step down.
The report also said the company has managed to pare its debt to ₹4,700 crore from ₹8,500 crore while lowering the average cost of debt by 127 basis points saving ₹60 crore on an annualised basis. Even the number of subsidiaries has been reduced to 22 from 73. It has also initiated a productivity improvement initiative spread over three years. It expects to generate a saving of about ₹500 crore by carrying out this exercise.
The company also said that the accumulated losses at the end of the year was 86.3 per cent of its peak net worth in the previous four financial years. Therefore, USL will be required to file a report under Section 23 of the Sick Industrial Companies (Special Provisions) Act, (SICA). It, however, noted that it does not reflect upon the long-term prospects of the company.