United Spirits hurrying to sell realty to repay debt

MUMBAI: India’s largest spirits maker, United Spirits (USL), majority owned by UK’s Diageo Plc, has hastened the process of selling 13 residential properties and mandated a leading banker to re-evaluate these assets, a person with direct knowledge of the development said.

According to the agreement between Diageo and Vijay Mallya, United Spirits’ former chairman, the controversial businessman has the right of first refusal over these properties.

Mallya has the option of buying three palatial bungalows in Goa, Mumbai and Delhi at a 10% discount to what is offered by the highest bidder. While making this announcement last month, senior USL executives had said they expected the transaction to be completed by the second half of the next financial year.

The liquor company is now trying to fast track the process. According to a person familiar with the development, the company believes Mallya will be less than enthusiastic about most of these properties as these are located in India and there is a danger that his lenders may seek to attach them.

Hence, USL may not have to sell the three prime properties at a discount to Mallya, even though he is supposed to be sentimentally attached to Kingfisher Villa in Goa and Kingfisher House in Mumbai, and might try to retain them. “The proceeds from the sale of the properties will be used to retire debt and fund growth,” a person familiar with USL’s strategy said.

The company’s “unproductive” residential properties are spread across Mumbai, Bengaluru, Goa, Kolkata and Hong Kong, and include a house on New Delhi’s posh Sardar Patel Marg.

“USL is in the process of appointing an independent valuer to value the 13 properties,” a USL spokesperson said. “United Spirits has embarked on a programme to monetise non-core assets and thus reduce debt. We believe we will extract good value for these assets which will contribute to reducing USL’s debt.”

PART OF SEVERANCE DEAL Besides the $75-million severance pay from Diageo for stepping down as the chairman of USL’s board, Mallya has also been offered a deal that allows him or his nominee the right of first refusal over 13 residential, non-core properties of USL in India. A Debt Recovery Tribunal in Bengaluru has stayed the $75-million payment to Mallya, but media reports say he has already received a part of this money.

“The properties do not belong to Mallya, these are now owned by USL, which offered him the right of first refusal. These properties warrant maintenance costs and attract tax. Mallya’s financial issues are no longer a concern of USL,” said a company executive. “The cumulative value of the properties as determined two years ago was Rs 2,900 crore,” senior USL officials told analysts on February 26, a day after Mallya stepped down as chairman.

“However, the cumulative value as things stand today should be significantly higher, as per the management. Mallya or his nominee will have to buy the property in a tight, time-bound agreement; UNSP expects to complete the transaction by the second half of the financial year 2017,” the senior management told analysts.

Credits ET Realty

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