Spirits giant Diageo on Monday said it has corrected many loopholes in the books of United Spirits after acquiring it from Vijay Mallya, and now India’s top spirits firm is transparent in its disclosures to regulatory authorities.
United Spirits (USL) has now strengthened its corporate governance, compliance practices and controls systems, Diageo officials said in the wake of a media report that the UK firm may have waived about Rs 10,000 crore of debt owed by Mallya’s overseas firms – much more than the Rs 1,225 crore that Diageo reported to the BSE.
A report in Indian Express based on Paradise Papers — a cache of 13.4 million documents obtained by German newspaper Süddeutsche Zeitung and investigated by International Consortium of Investigative Journalists (ICIJ) in partnership with The Indian Express that revealed how Barmuda’s Appleby and Singapore’s Asiaciti Trust help the global rich move their money abroad – alleged that Mallya had funnelled more than $1.5 billion in debt from USL to his four overseas firms over seven years till 2014.
USL has now strengthened its corporate governance, compliance practices and controls systems, Diageo officials said. “While under the control of former chairman Dr Mallya, USL advanced loans to subsidiaries,” a Diageo spokesperson said.
“These intra-corporate loan arrangements pre-dated Diageo acquiring its interest in USL in July 2013. After Diageo took control of USL, all outstanding loan amounts have been disclosed and adequately provided for in company accounts, in accordance with applicable accounting principles,” the person said.
According to the Express report Diageo had approached London-based law firm Linklaters LLP to undertake a massive restructuring exercise to simplify the complex group structure created by Mallya.
Top Diageo officials said the numbers are speculative and a matter of interpretation. “Diageo is trying to recover what it can claim as damages from Mallya and a sizeable sum has been taken as a hit on business where Vijay Mallya overpaid and siphoned off,” an official said on condition of anonymity. “There is absolutely no truth to speculations that Diageo has let go a sizeable number as write-offs without making any attempts to recover it,” the person said.
Diageo has stopped payment of $7 million a year to Mallya as part of the deal and sought compensation for the losses incurred by it.
The British firm had agreed to pay Mallya, who now lives in the UK after Indian banks approached courts to recover money lent to his now defunct airline, $75 million over five years as global non-compete and non-interference fee post his exit from USL. Citing violation of the agreement by Mallya, Diageo has ruled out the future installments to him, saying it was “not liable to pay such amount”.
“Diageo and other group companies have demanded from Mallya the repayment of $40 million, which was paid on 25 February 2016, and also sought compensation from him for various losses incurred by the relevant members of the Diageo group on account of the breaches committed by him,” Diageo said in its Preliminary Results for the year ended June 30, 2017.
