Vijay Mallya denies deal with Diageo

The share price of United Spirits Ltd fell sharply on Monday, as promoter Vijay Mallya said he'd not reached a deal to sell stake to the global spirits maker Diageo.

USL's share prices had more than doubled this year on speculation of the sale of stake. The stock fell 9.1 per cent to close at Rs 1,095 on the Bombay Stock Exchange. The shares of UB Holdings, the parent, declined 9.5 per cent to close at Rs 118.65 on the BSE.

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Media reports had quoted Mallya as saying: "I do not have to do a deal with Diageo at all. I am under no compulsion whatsoever. But having said that, I will do what is good... for myself, my family wealth and for long-term shareholder value. I must do that for every business because these are public companies and I owe it to the shareholders and stakeholders in these companies."

USL shares had jumped 50 per cent in the past three months on hopes of a deal with Diageo. It touched Rs 1,424 on the BSE on October 23 from a 52-week low of Rs 450 in January.

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According to Deven Choksey, managing director of KR Choksey Shares and Securities, there was no way out from Mallya's debt problems unless he sold some of his stake in one of his companies.

"It will be difficult to get out of the clutches of lenders and a compromise has to happen and funding will have to take place," he said.

Mallya had been talking to Diageo Plc, makers of Johnnie Walker whisky and Smirnoff vodka, for stake sale in USL.

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He told news reporters that he was unsure whether he would agree to the terms. "Selling assets to fund the airline (Kingfisher, his group's ailing airline)? No plans of that nature," Mallya had said.

Kingfisher's scrip rose three per cent to close at Rs 11.75, a third day's gain. There is speculation in the market that Mallya was looking for partners for the airline. Media reports said two investment bankers had been hired as part of the search.