In fresh troubles for embattled businessman Vijay Mallya, a forensic audit has found possible ‘irregularities and mismanagement’ in advances and investments made by Mangalore Chemicals and Fertilizers to his other group companies.
The Board of Mangalore Chemicals and Fertilizers Ltd (MCFL), which Zuari Fertilizer & Chemicals last year vested control from Mallya, had appointed Ernst & Young LLP to do a forensic investigation into the Rs 200 crore investment MCFL had made in to Bangalore Beverages Ltd.
The audit was also asked to look into various advances made by MCFL to Mallya’s flagship United Breweries (Holdings) Ltd (UBHL) of which a sum of Rs 16.68 crore was outstanding as of March 31, 2016.
Upon completion of its investigations, Ernst & Young made a presentation to the Board of Directors of MCFL today. The audit concluded that these “transactions may have involved irregularities and elements of mismanagement in the company,” MCFL said in a stock exchange filing.
It, however, did not elaborate.
Bangalore Beverages is a step-down subsidiary of UBHL.
Mallya till 2014 controlled MCFL and he had to ward off a hostile takeover by Deepak Fertilizer by joining hands with Saroj Poddar-led Zuari Group. This collaboration led to Zuari gaining complete control of MCFL with 53 per cent shareholding even though Mallya’s UB Group continues to hold 21.97 per cent in the fertilizer maker.
MCFL did not say when the investment and the advances were made.
The company said it is taking necessary legal advice in connection with the findings of Ernst & Young.
Meanwhile, in its financial results announced today, MCFL made provision of Rs 200 crore for potential diminution in the value of investments in Bangalore Beverages Ltd. It has also provided for Rs 16.68 crore advances receivable from UBHL in its books of account for 2015-16 financial year.
According to UBHL’a annual report, its subsidiary Bangalore Beverages is facing liquidity crunch.
Earlier, alleged financial irregularities had come to fore at United Spirits Ltd (USL) relating to loans advanced to UB Group firms including for long-defunct Kingfisher Airlines.
However, Mallya later inked a Rs 500-crore sweetheart deal with Diageo, to whom he had sold controlling stake in USL in a multi-billion dollar deal.
Mallya, who has been known for his flamboyance and used to be referred to as ‘King of Good Times’ before his empire ran into troubles beginning with collapse of Kingfisher Airlines, managed that good deal after a year-long boardroom battle at USL.
Besides, various UB Group firms are already facing probes by Sebi relating to listing rule violations, while corporate affairs ministry is also looking into alleged violations of certain provisions of the Companies Act. The role of previous auditors is also under the scanner.
Mallya recently had to resign from the Rajya Sabha amid tightening of the noose by various enforcement agencies and lenders who are trying to recover over Rs 9,000 crore dues from Kingfisher and its guarantors.