If cornered Vijay Mallya dilutes, Heineken rules

Vijay Mallya, desperately seeking funds, may be ready to do what everyone is expecting him to ultimately do — sell his personal stake in UB Group cash cow United Breweries Ltd (UBL) to bail out doddering Kingfisher Airlines.

If sources are to be believed, then the troubled businessman, who is trying to keep his airline business air-borne, is in final stages of negotiations to sell part of his stake to Dutch beer major Heineken, which already owns a 37. 5% stake.

That would be quiet a climbdown for the liquor baron, who had vigorously tried to ward off any attempts by Heineken to increase stake in the past.

Currently, Mallya holds 23% stake in UBL, while his liquor company United Spirits Ltd (USL) and UB Holdings have 14.5%.

According to people in the know, the liquor baron is looking to offload 12-13% stake, which is expected to reportedly fetch him a valuation of Rs1,700 crore.

If the stake sale talk fructifies, then Heineken will become the majority stakeholder in UBL with a 50% stake.

Ravi Nedungandi, chief financial officer, refused to confirm the deal saying, “We don’t want to respond to every speculation.”

A liquor industry analyst with a leading brokerage firm, who did not want to be named, said Mallya was trying to make a last-ditch effort to keep his group companies from crashing.

“We have been hearing so many rumours lately that we do not know what to believe, but it is a well-known fact that there is a capital requirement for UB Holdings. I suppose, this (partial stake sale in UBL) would take care of it,” he said.

The analyst, however, felt the valuation being quoted was “extremely superior” and doubted whether Mallya would be able to get that. “It’s a challenging valuation,” he said.

Heineken wrangled stake in Mallya’s UBL by buying Scottish & Newcastle’s (S&N) 37.5% stake in 2008. Post that, the Dutch beer company has two non-executive representatives on the board and a chief executive officer.

Mallya has been desperately trying to raise funds for his beleaguered Kingfisher Airlines, which he launched in 2005 and is on the verge of collapsing due to huge debts. He and his Indian and overseas group companies own 50.51% in the airline and the remaining shares are held by institutional investors and public.

Reuters adds: Meanwhile, the troubled carrier has named Manmohan Singh Kapur, Lalit Bhasin and Shrikant Ruparel as new independent directors on its board on Wednesday. The move to comply with rules came after the last of its independent directors quit last week amid growing concerns over its survival.

Indian rules require at least half of the directors on a publicly listed company to be independent. Kingfisher’s board was left with just three executive directors, including chairman Vijay Mallya, after it lost four independent directors in the last one year.

Kingfisher, controlled by Mallya, has a debt of $1.3 billion and is facing near collapse as banks have so far refused to lend it more for day-to-day operations.

ICICI Bank, which has loans of about Rs430 crore to the embattled airline, has asked for a top-up on its loan security or to adjust the loan amount after the carrier’s stock was pounded in recent weeks.  The ailing carrier will operate about 120 flights with 20 planes this summer, according to its revised schedule, a far cry from the 370 daily flights with 64 planes last September. The massive cutback in flights has reduced revenues, leaving Kingfisher with little cash to pay its employees, airports and tax authorities.