United Spirits shares surge as Mallya steps down as chairman | business | Hindustan Times
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United Spirits shares surge as Mallya steps down as chairman

Investor interest in United Spirits is mainly due to relief. Apart from emerging from the governance shadow that had clouded United Spirits’ business plans with Mallya’s presence on the board – he has been declared a willful defaulter by Punjab National Bank

business Updated: Feb 26, 2016 10:52 IST
HT Correspondent
Shares of liquor major United Spirits are trading 4% up in early morning trade after a late Thursday announcement that Vijay Mallya has agreed to step down as the non-executive chairman of the company, owned by world’s largest spirits maker Diageo
Shares of liquor major United Spirits are trading 4% up in early morning trade after a late Thursday announcement that Vijay Mallya has agreed to step down as the non-executive chairman of the company, owned by world’s largest spirits maker Diageo

Shares of liquor major United Spirits are trading 4% up in early morning trade after a late Thursday announcement that Vijay Mallya has agreed to step down as the non-executive chairman of the company, owned by world’s largest spirits maker Diageo.

Mallya gets $75 million to step down

Under the deal, Diageo will pay Mallya $75 million over five years, in return of his stepping down. Mallya has also agreed to a five-year global (excluding UK) non-compete agreement with Diageo.

Read more: Vijay Mallya finds 75 million reasons to resign as USL chairman

Mallya’s exit gives reprieve to USL from former’s battle with Diageo

Investor interest in United Spirits is mainly due to relief. Apart from emerging from the governance shadow that had clouded United Spirits’ business plans with Mallya’s presence on the board – he has been declared a willful defaulter by Punjab National Bank – the exit of the flamboyant businessman also gives reprieve to United Spirits from the bitter legal battle between Mallya and Diageo over the chairmanship of the business.

Morning trade higher than two weeks average

In the first 45 minutes of the morning trading, 62,000 United Spirits shares were traded on the BSE, significantly higher than the two week average of 33,000 shares.

Diageo gets a free hand to drive growth

Analysts say the agreements reached between Mallya and Diageo will give Diageo a free hand to drive growth.

An internal probe had found financial irregularities at United Spirits, following which the board of directors had last year, asked Mallya to resign from the company. Mallya, who owned a 4% stake in United Spirits had refused to resign.

On Thursday, Mallya said that he has agreed a mutual release with both Diageo and United Spirits from claims concerning the alleged irregularities disclosed by United Spirits in April last year and he would now be the founder emeritus of United Spirits.

“The agreement reached is valuable to United Spirits and its shareholders. It also brings to an end the uncertainty relating to the company’s governance,” said Anand Kripalu, MD and CEO of United Spirits.