United Spirits stocks feel 'spirited' as alleged 'wilful defaulter' Mallya steps down

Bengaluru headquartered United Spirits, one of the world’s largest spirit maker in terms of volume, informed the stock exchange, that the company has entered into an agreement with Vijay Mallya to step down from the post of chairman and non-executive director.

According to the agreement Vijay Mallya would resign from the post of chairman and non-executive director; from his position as a director of Royal Challengers Sports Private Limited (RCSPL) and Four Seasons Wines effectively from 25th Feb 2016. Following Mallya's resignation, the board of directors of the company announced that Mahendra Kumar Sharma, independent director and chairman of the audit committee, has been appointed as the chairman of the board with immediate effect.

In lieu of the deal reached, USL will give USD 75 million to Mallya in consideration for his five-year non-compete agreement and an undertaking that he will not buy any shares of USL for the next five years. The first-year payment would be USD 40 million.

United Spirits in a statement noted that ‘today’s agreement brings to an end the uncertainty relating to the company’s governance as well the ambiguity relating to certain historical transactions that were voted down by the company’s shareholders in November 2014 and also puts in place a global five-year non-compete, non-interference and standstill arrangement with Vijay Mallya.

Anand Kripalu, MD & CEO of the liquor maker said: “The agreement reached today is valuable to USL and all its shareholders. It also brings to an end the uncertainty relating to the company’s governance. This will allow the company to prosper and build on the great platform that we have already created in this exciting market.”

Key terms of the company agreement includes resignation from positions on the boards of the company and its subsidiaries, and certain other matters. Mallya will have no ongoing role at the company following the agreement reached. Mallya will have the honorary title of “Founder Emeritus – USL", however this title does not carry any authority, responsibility, rights or benefits of the company.

United Spirits and Vijay Mallya have agreed to a mutual release in relation to matters arising out of the initial inquiry by the company and its auditors PWC into certain matters referred to in its financial statements and the qualified auditor’s report for the financial year ended 31 March 2014.

United Spirits also struck down certain historical agreements and related arrangements which the Diageo Group had entered with Vijay Mallya, as these understandings were also voted down by the shareholders in November 2014. Termination of these agreements also releases the United Spirits from all liability under the agreements, including in respect of accrued, unpaid amounts.

Giving a thumbs up to the news, scrip of United Spirits surged more than 5 per cent to hit an-intraday high of Rs 2833 in early trade on NSE.