India: Asking Vijay Mallya to step down from United Breweries board was merely following a regulatory order - Heineken

United Breweries merely followed a regulatory order in asking chairman Vijay Mallya to step down, Heineken NV, the Indian brewer’s largest shareholder, said in its first comment on the businessman since he got embroiled in a series of cases related to overdue loans, the Economic Times reported.

Heineken, the world’s second-largest brewer, said also there had not been any disruption to its Indian business or management after partner United Breweries sent the notice to Mallya.

About three weeks ago, the Securities and Exchange Board of India banned Mallya from the securities market as well as holding any board or key managerial positions at listed companies. The order also covered some former executives of United Spirits, a company Mallya previously owned and is now controlled by UK’s Diageo. Mallya, according to legal experts, is expected to challenge the Sebi order.

Sebi issued an executive order to Mallya and it was not the will of the shareholders or board of directors, but just a court order that had to be executed, Jean-Francois van Boxmeer, Heineken’s chairman of the executive board, said on an investors call on February 14.

“It’s for Dr Mallya to react on that if he wants to have a stay on that position. It is entirely in his hands to go with these procedures,” he said. “And, as to the shareholder, their rapport between the two promoters as they are called in the core shareholding, that’s Heineken and the group of Dr Mallya, we still are in a joint venture agreement.”

In a mail sent to Mallya last week, the company said: “In order to comply with the Sebi order and in the absence of any stay or vacation of the said order, the board is compelled to request you to step down from the board of United Breweries with immediate effect.”

The regulator had also directed United Spirits to provide information on steps taken to recover Rs 1,880.8 crore from Mallya and the companies to which the money was diverted. The funds were allegedly diverted during the period between 2010 and 2013. As per a PwC-UK report, the amount was Rs 655.55 crore, while an E&Y report estimates it at Rs 1,225.24 crore, according to details cited in the order.

Heineken has been hiking its stake in United Breweries, from 37.5% in 2003 to about 43% now by purchasing shares in block trades from the stock market. The Dutch firm, which has the first right of refusal to buy shares owned by Mallya in United Breweries, is also open to a hostile takeover. In 2016, Heineken purchased United Breweries shares from Yes Bank and ECL Finance, with whom Mallya had pledged the shares.

United Breweries, which controls over half the Indian beer market with brands including Kingfisher, posted an 8% decline in sales during last quarter. “A large part of that decrease was due to demonetisation,” the company told investors.

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