Don't reappoint Mallya, advisory firms urge USL shareholders
20 September 2014
Proxy advisory firms like Institutional Investor Advisory Services (IiAS) have recommended that shareholders vote against the resolution for reappointment of chairman Vijay Mallya at United Spirits, as it may hinder the company's "business prospects".
The resolution on his reappointment will be taken up for voting in the Diageo-controlled United Spirits' annual general meeting to be held on 30 September.
The development may compound the woes of Mallya, who is already facing action over defaults to a clutch of state-owned banks and other financial institutions (See: Banks moving to get Kingfisher, Mallya declared wilful defaulters).
As Mallya has been declared as a wilful defaulter by banks in connection with their lending to Kingfisher Airlines, this might be an impediment in the way of further fund-raising exercise, the New Delhi-based IiAS said. Mallya is facing 22 cases across various courts, banks and other financial institutions in this regard.
''According to a Reserve Bank of India circular, banks must not extend loans to companies where a director is considered a wilful defaulter. IiAS recognises that USL is a Diageo subsidiary, and can access funds from its parent company.
"However, this is not an optimum way of doing business. Until this matter is resolved, Mallya continuing on the board will constrain USL's ability to raise debt from the Indian financial system,'' it said in a report.
Besides Mallya's appointment, IiAS has also opposed a remuneration hike recommended for PA Murali, director and chief financial officer of USL, from Rs4.2 crore to Rs12.8 crore a year.
''P A Murali is answerable for the intra-group transactions for which USL has taken write-offs and provided for in its 2013-14 financial statement. Given that context, IiAS recommends that Murali step down from his directorship on the board,'' the report said, adding that it was higher than industry peers.
Early this month, the Supreme Court had refused to grant Mallya's plea against State-run United Bank of India's decision that declared him a wilful defaulter.
In a special leave petition filed through lawyer E C Agrawala, Kingfisher said the committee's move was ''arbitrary, unreasonable, untenable and unlawful.''