After losing United Breweries, it's game over for Mallya after resigning as chairman of Mangalore Chemicals

By Nazim Khan

After losing control of marquee firms United Spirits and United Breweries, it appears that one of the last-remaining jewels in UB's crown, Mangalore Chemicals and Fertilizers (MCF), is set to go.

In a filing to the stock exchange on Monday, the company said its chairman Vijay Mallya had stepped down from its board with immediate effect.

The move comes two months after United Bank of India declared the UB honcho a 'willful defaulter' (though Mallya later managed to obtain a court injunction on the order), relating to debt of Rs 6,500 crore, which his grounded airline Kingfisher Airline owes to banks.

The move was followed afterState Bank of India, Punjab National Bank, IDBI Bank and UCO Bank slappeda notice on him, asking why he should not be declared one.

The development at MCF comes in the wake of an interesting battle for takeover of the firm, in which Pune-based rival Deepak Fertilizers has been looking to seek control.

It all started in July last year when Deepak picked up 24 percent stake in MCF from a host of investors, and has since gone on to pick up additional shares through the open market.

Sensing a takeover attempt, Mallya, whose UB group held about 22 percent in MCF, sent out feelers to his "good friend" Saroj Poddar, whose firm Zuari, promptly began increasing its own stake in the firm from 10 percent to about 16 percent presently.

MCF, Deepak and Zuari all operate in the fertilizer business and while Zuari itself was at one point eyeing a takeover of MCF, Poddar ruled out a hostile attempt of the firm citing old relations with the UB chief's late father Vittal Mallya.

It soon boiled down to a two-way battle between UB-Zuari (which together held 38 percent) on one side and Deepak (with a little over 25 percent) on the other, and both camps launched a series of rivaling open offers.

Deepak was seen racing ahead when it launched an open offer to acquire additional 20 percent in the firm at a price of Rs 93 to a share, which clearly topped the Rs 81 per share offer Zuari-UB could put together.

The Deepak camp got a further boost after Mallya was declared a willful defaulter. RBI norms essentially block out willful defaulters from operating on the boards of any firm, as banks are prohibited from lending to such firms.

Deepak must have hoped it would use Mallya's willful defaulter tag as a stick to beat him with. By standing aside from the board Mallya has clearly saved MCF from adverse questions arising out of the willful defaulter tag hanging on him, but it clearly loosens his grip on the last major firm in UB's control.

The backdrop of recent events at United Spirits, in which Mallya has managed to stay on as chairman even as Diageo has acquired management control, may serve as a precursor to what may lie ahead for MCF.

At a United Spirits extraordinary general meeting recently, minority shareholders blocked a number of resolutions that were seen as being overtly favourable to Mallya.

While no replacement has been named at MCF, his resignation has clearly tipped the scale in Deepak's favour, whose stake has now increased to about 32 percent following the open offer.

If it were to muster some support from institutional shareholders (many of whom tendered in some of their shares to Deepak), it won't be surprising if it finally manages to wrest management control of the firm, bringing in an interesting culmination to a year-and-a-half takeover battle, rare as they are in the Indian corporate arena.

Updated Date: Dec 02, 2014 08:00:56 IST