Concerned over the 'loss' caused to United Spirits' minority shareholders due to $75-million sweetheart deal between its erstwhile promoter Vijay Mallya and new owner Diageo, regulator Sebi may soon order additional payout for small investors by way of a fresh open offer.
Sebi, which last night barred Mallya and six others from securities markets on fund diversion charges and also restrained him and Ashok Capoor (ex-MD of United Spirits) from holding directorship at any listed firm, is also probing "change in control of USL" due to a settlement pact under which the beleaguered businessman agreed to exit from boards of USL group companies on payout of $ 75 million.
Sources said that the investigation conducted by the markets watchdog shows change in effective control of the company after this settlement agreement, resulting significant ownership gains to the new promoters in addition to the monetary benefits to the old owners, thus causing a "loss" to the minority shareholders of the company.
"Sebi's investigation has reached an advanced stage and the regulator may have to order an additional payout to the minority shareholders, possibly by way of a fresh open offer," a senior official said.
This is separate from an 'additional payout' that Sebi had ordered Diageo in June last year to pay to the minority shareholders, who had tendered their shares in an open offer in 2012, on account of $140.97 million payment to Stanchart Bank with respect to liability of Watson Ltd, another Mallya- affiliated company, pursuant to default on a bank guarantee.
UK-based Diageo has filed an appeal before the Securities Appellate Tribunal against the aforesaid SEBI direction.
Besides, the Securities and Exchange Board of India (Sebi) is also separately looking into the role of certain auditors for their alleged failure to detect "diversion of funds from USL" to certain companies of Mallya-led UB Group, including the erstwhile Kingfisher Airlines whose collapse led to the entire business group running into financial troubles.
Cracking its whip, Sebi had last night barred Mallya and six former officials of USL from securities markets in a case related to illegal fund diversions.
Further, Sebi has asked USL, from where Mallya resigned as director and chairman in March 2016, to provide details about steps being taken to recover the diverted funds.
Sebi has restrained Mallya, Capoor and five others from the securities market and also from "buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or indirectly" till further directions.
The five others are: P A Murali, Sowmiyanarayanan, S N Prasad, Paramjit Singh Gill and Ainapur S R.
Mallya and Capoor have been barred from "holding position as directors or key managerial persons of any listed company". Reacting to Sebi's order, Mallya said he was "surprised".
"Neither have I had any communication with SEBI nor have I ever been afforded a hearing before this purported action has been taken. I have always strongly denied all allegations made by USL," he said in a statement.
He also took to Twitter to say that "allegations of fund diversion out of USL are baseless" and said "USL accounts were approved by top auditors, an eminent Board of Directors and shareholders".
As fresh troubles emerged after Mallya agreed to sell to Diageo a controlling stake in his erstwhile flagship firm USL, the two got into a bitter boardroom battle, which they later sought to end with $ 75 million pact in February 2016.
Sebi's latest order came close on the heels of CBI naming Mallya, Kingfisher Airlines and nine others in the charge sheet related to the 2015 loan default case. Sebi said it is also examining the settlement agreement between Mallya and Diageo as well as the role of auditors in the non-detection of diversion of funds from USL. In furtherance of this pact, Mallya resigned from his position as Chairman and Non Executive Director of USL. On the same date, USL and Mallya entered into an agreement wherein they agreed to a mutual release in relation to matters arising out of the Initial Inquiry by USL.
"The matter of Diageo entering into a Settlement Agreement with Mallya vis a vis USL's agreement with Mallya is being examined separately by Sebi," the regulator said.
Under the settlement pact, Diageo agreed to pay $ 75 million to Mallya who in turn agreed to resign from his position as Chairman and Director of USL and also Director in other USL Group Companies.