United Bank of India’s (UBI) decision to declare Vijay Mallya as a wilful defaulter has cast a shadow on Zuari chief Saroj Poddar’s ambition to jointly own a controlling stake in Mangalore Chemicals and Fertilizers (MCF) with him.
Poddar and Mallya had jointly made an open offer for additional stake in the fertilizer company, which was approved by the market regulator Securities and Exchange Board of India (SEBI). According to an agreement signed between United Breweries (UB) Group and Poddar’s Adventz Group on May 12, 2014, Mallya was supposed to remain as the chairman of MCF for next five years if they jointly gained controlling stake in the company. The agreement also allowed Mallya to appoint three directors on the board and gave him the right of first refusal over Poddar’s shares in MCF.
But with Mallya now being declared as a wilful defaulter he may not be allowed to take board seat in any company. Sources claimed that the agreement will have to be re-worked unless Mallya gets a stay on UBI’s decision to tag him as a wilful defaulter.
“Everything regarding the bid has to change if there is no stay order on the wilful defaulter tag on Vijay Mallya. He cannot remain the chairman of MCF, neither can he appoint directors on its board…The next course of action on MCF open offer will be decided once Mallya comes up with a plan to tackle UBI’s notice” said a person familiar with the development.
Poddar refused to comment on the development.
A senior banker said that UBI has already alerted the Reserve Bank of India (RBI), Credit Information Bureau India (CIBIL) and SEBI about this move. “It is unlikely that Mallya will be allowed on the boards of any company,” the banker said requesting anonymity.
UBI on Monday declared grounded Kingfisher Airlines, its chairman Vijay Mallya and three other directors – Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly – as wilful defaulters for non-payment of dues amounting to crores of rupees to the bank.
Kingfisher Airlines had moved the Calcutta High Court after the bank had identified it as a wilful defaulter. But last week the court had dismissed the airline company’s plea paving the way for UBI to declare it as a wilful defaulter.
Industry sources indicated that Mallya may move the Supreme Court to get a stay against UBI’s decision. “We heard that Kingfisher has filed a SLP (special leave petition) in Supreme Court. But so far UBI has not received any stay order on declaring Mallya as a wilful defaulter,” said a banker.
Mallya, through UB Group, holds 21.98% stake in MCF. He had joined hands with Poddar who is competing Deepak Fertilisers for over a year now for a controlling stake in MCF.
Deepak Fertilisers currently owns 25.3% stake in MCF and has made an open offer, at Rs 63 a share, for additional 26% stake. To counter this, Poddar and Mallya have jointly made an open offer for a similar stake at Rs 68.55 per share. SEBI has approved both the open offer proposals last month. Poddar, through Zuari, holds 16.43% stake in MCF.
Deepak Fertilisers has received approval from both SEBI and Competition Commission of India (CCI) for its open offer. CCI’s clearance is still pending on Mallya-Poddar’s joint open offer.