After the good news, the bad: Sebi lens on Mallya’s ‘sweetheart deal’

  • Ramsurya Mamidenna, Hindustan Times, Mumbai
  • Updated: Feb 26, 2016 23:30 IST

Even as the contours of the agreement between United Spirits Ltd (USL) and beleaguered tycoon Vijay Mallya are being studied, the Securities and Exchange Board of India (Sebi) is learnt to have initiated the process of looking into the “sweetheart deal” to ensure that the settlement is not at the expense of minority shareholders of USL.

The regulator is also likely to take up the issue of exempting Mallya from being bound by a non-compete clause for the UK, while applying it in the rest of the world. USL is 54.7% controlled by Diageo.

Under the terms of the agreement, the two parties have mutually agreed to “global non-compete, excluding the UK, non-interference and standstill obligations as regards United Spirits for a period of five years following this date.”

However, it is not clear why the UK market has been left out of the clause. Mails sent to USL did not elicit any response. Market regulator Sebi also didn’t comment on the issue.

Meanwhile, shareholder advisories have come down on USL.

“The terms of the exit suggest that Diageo and USL want a clean break from Vijay Mallya,” Amit Tandon said in a report by his firm Institutional Investor Advisory Services. “While USL’s shareholders have been short-changed, the decision to untangle the company from the UB group is in their long-term interest. Diageo is picking up the tab for this exit — but shareholders must hold the board accountable for its inability to break free from the Mallya stranglehold.”

It is likely that the Sebi may seek more details on the deal, including the value of the non-compete agreement and whether it aligns with the $75 million that USL is paying to Mallya .

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