The recent Karnataka high court ruling declaring Vijay Mallya-led United Breweries Holdings Ltds’ (UBHL’s) sale of United Spirits shares to UK’s Diageo as ‘null and void’ may have dealt a setback to Mallya and Diageo, but bankers see improved prospects in recovering their loans given to Kingfisher Airlines (KFA).
Last week, a division bench of the Karnataka High Court ruled that UBHL was already caught in several winding up petitions by creditors and the deal would be void until a decision was taken on those petitions. Diageo was also asked to return those shares.
Creditors have invoked corporate guarantees for loans to Vijay Mallya-led KFA.
Several bankers on condition of anonymity told HT that the court ruling has improved their chances of recovering loans. A group of 14 banks, including State Bank of India, Punjab National Bank, IDBI Bank, Bank of Baroda and United Bank of India had loaned Rs 7,000 crore to KFA, which is grounded since October 2012.
UBHL and Diageo have already indicated that they will move to the Supreme Court against the order. Thus, bankers and analysts say the next move will depend on the Supreme Court ruling.
Avi Mehta, analyst at IIFL Institutional, says Diageo will still remain the largest shareholder in United Spirits even if the stake falls to a little under 20%. However, it has few options to increase stake. It can acquire 3.6% stake via open market purchases until March 2014, without triggering an open offer or could seek another preferential issue, Mehta said in a report.