Giving no respite to Vijay Mallya-owned United Breweries Holdings, the holding company of United Spirits Ltd (USL), the Bombay High Court has rejected a petition filed by USL for a three-week stay on selling of its pledged shares with the banks. This means the banks can continue to offload all the pledged shares of the liquor company.
USL has pledged about 26 lakh of shares with a consortium of 18 banks led by SBI as collateral for loans taken by the bankrupt Kingfisher Airlines (KFA).
According to lawyers representing the banks, the shares at the current price of Rs 1,870 would fetch them around Rs 540 crore.
The company had moved the High Court against the lenders on March 26 after the latter started selling some of the shares of USL and another group company Mangalore Chemical and Fertilizers Ltd. It said that doing so would not only harm the investors of the listed entity but also will impact the ongoing deal with global alcoholic beverage company Diageo, which intends to pick up about 26 per cent stake in the company. However, a fall in the share price would not fetch a good valuation to United Spirits.
Counsel for UB Holdings argued that the bankers have already sold about 7.3 lakh shares of USL in three tranches in the last few days thus resulting in a 40 per cent decline in the share price. He added that if the banks stop the sale for at least three weeks and within that period they (USL) would find a suitable buyer for the shares. However, if they fail in doing so and the price falls by Rs 100 a share then the banks were free to offload the remaining shares.
However, SBI lawyers said that the decision to sell the shares was taken after the notice period (given to the UB Group) and that there is no reason why they can’t sell the shares, an exercise being carried out by the lenders to recall the loans amounting to Rs 7,000 crore with interest. They further added that consortium would consider their plea if the company is able to provide security of tangible and liquid assets worth Rs 500 crore.
The restructuring process of KFA started in December 2010 and the operations of the airlines have been grounded since October last year over several regulatory issues and inability of the liquor baron to repay the debt amount.
Meanwhile, except United Spirits, all the other group stocks gained. The shares of Mangalore Chemicals and Fertilizers Ltd gained 20 per cent at Rs 39.30 on Tuesday on the BSE, while Kingfisher Airlines jumped 4 per cent at Rs 8.71 and United Breweries Holdings rose 5 per cent to Rs 43.80. However, United Spirits lost 1.57 per cent to Rs 1,859.80.
Meanwhile, the consortium of banks has sold all the 1.15 crore of pledged shares of Mangalore Chem and Fertilizers in block deal on Tuesday to Zuari Industries.
‘Fragments ownership’
Gautam Sinha Roy, VP — Equity Strategy & Product, Motilal Oswal Securities Ltd, said: “This fresh sale by banks further fragments ownership of the USL shares away from the Mallya-Diageo consortium (unless stopped by the HC) and makes the process of Diageo’s acquisition that much more tedious. This could result in some weakness in the stock in the near-term, which will be a buying opportunity for long-term investors.” “We highlight that the lenders might be tempted to sell UNSP shares in the open market to optimise the realisation (compared to Rs 1,440 which is the open offer price), we believe that it is in everyone’s interest, particularly the lenders who have UNSP shares as collateral, to see the deal through,” said Deutsche Bank.