United Spirits delays MSME payments

During the course of hearing petitions early this week at the Karnataka High Court, Bangalore seeking to wind up UB group companies United Breweries Holdings (UBHL) and Kingfisher Airlines (KFA), Justice Ram Mohan Reddy remarked, “These are hard times for Vijay Mallya.”

Mallya's hard times rubbed off on micro, small and medium enterprises (MSMEs) as well, who supplied merchandise to group company United Spirits (USL) during fiscal 2013.
The company delayed payments of Rs 20.28 crore during 2012-13 to MSMEs, while the amount of accrued interest that remained unpaid in respect of the principal amount settled during the year was Rs 69 lakh, according to the auditor's report for 2012-13 that forms part of USL's fiscal 2013 annual report. Vijay Mallya is chairman of USL whose revenues (net of excise) stood at Rs 8,509.9 crore in 2012-13.

The auditors have also highlighted delay in paying term loans and interest thereon to banks. “The delay up to 30 days amounted to Rs 662.7 million (Rs 66.27 crore) and Rs 1,306.6 million (Rs 130.6 crore) with respect to interest and principal respectively and the delay between 30 to 90 days amounted to Rs 672.2 million (Rs 76.2 crore) and Rs. 2,971.6 million (Rs 297.16 crore) with respect to interest and principal respectively.”

The annual report also says that USL has temporarily shelved the idea of setting up a glass container manufacturing in south India because of “inability to adequately fund the project.”

Mallya also refers to pressure on the company's (profit) margins to remain due to reluctance of state agencies to increase prices of liquor products commensurate with inflation. He adds that about 75 per cent of the liquor is sold by USL to state agencies that procure liquor for retail distribution.

USL will be holding its annual general meeting on September 24, the day on which annual general meetings of two more group companies - Kingfisher Airlines and Mangalore Chemicals & Fertilizers – will also be held.

The KFA annual general meeting coincides with the deadline to  UHBL that has been directed to submit an audited statement of account on the utilisation of proceeds arising from the sale of 1.01 crore shares of USL held by UBHL, to UK-based liquor company Diageo Plc at Rs 1,440 per share.

The sale of shares was in accordance with the November 2012 deal between Diageo and UB group. UBHL realised Rs 1,460.36 crore from the sale and submitted a certificate from its auditors on utilisation, instead of an audited statement of account, as directed by the Karnataka High Court.

UBHL settled dues of Rs 820 crore and deposited Rs 379.75 crore with a bank, according to its auditors Vishnu Ram & Co., Bangalore.