United Spirits to disclose impact of financial irregularities by month-end

Diageo-controlled United Spirits Ltd (USL), India's largest liquor maker, has declined to share the internal inquiry report on various financial irregularities involving the firm to the stock exchanges.

Responding to a call by BSE and NSE to make the report public, it said that the internal inquiry report contains sensitive commercial and operational information concerning the company and transactions and dealings involving various parties, and is confidential to the company.

"A public disclosure of the internal report would provide the company's competitors and other third parties with vested interests an access to such sensitive commercial and operational information of the company, and thereby provide an opportunity for such parties to use such information in a manner that is prejudicial to the interests of the company and its shareholder," it said.

USL told the bourses on Wednesday that any further implications of the content of the internal report on its books will be duly examined by the auditors and incorporated in the company's financial statements for the financial year ended March 31, 2015. The statements are due to be published by May 31, 2015.

The firm added that the board has clarified that it was not in a position to make any final determinations with regard to the role of any individuals involved.

"In the event of a public disclosure of the internal report, the company and its directors would stand exposed to the risk of allegations of having caused reputational damage to the persons against whom adverse findings have been reported in the internal report, and therefore risk potential claims or criminal charges of defamation being made by such persons, all of which would also be adverse to the interests of the company and its shareholders," USL said.

The development is related to an investigation probing irregularities over financial transactions involving USL and other UB Group firms, controlled by Mallya.

The probe covered the company's financial dealings with various UB Group companies, including a loan of Rs 1,300 crore to United Breweries Holdings, which may have been further lent to Kingfisher Airlines, a defunct aviation venture of UB Group.

USL was forced to make a provision of Rs 330 crore for FY14 on this eight-year loan.

The ongoing investigation also covers a loan of Rs 600 crore to various business associates of USL, including third-party bottlers.

Soon after completing a revised open offer to gain control of USL last July, Diageo had initiated a thorough investigation in the matter.

The firm is looking at options to push out Vijay Mallya out of United Spirits board after the former promoter of USL appeared defiant over calls to make him step down as chairman of India's top liquor maker.

Diageo owns 54.78 per cent stake in USL, while Mallya owns 4.09 per cent stake, partly through public listed holding firm United Breweries (Holdings) Ltd. Over half of UB Group's stake is pledged with financial institutions. However, UB Group is still counted as a co-promoter of the firm.

(Edited by Joby Puthuparampil Johnson)

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