Indian tycoon Vijay Mallya on Thursday resigned as chairman and non-executive director of United Spirits Ltd (USL) as part of a $75-million (Rs.516 crore) deal with its majority holder and global liquor major Diageo plc of Britain.
"We have entered into an agreement with Vijay Mallya under which he has resigned from his position as chairman and non-executive director of United Spirits Ltd and from the boards of other USL group companies," the London-based Diageo said in a filing to the London Stock Exchange and Indian stock exchanges BSE and NSE.
Following Mallya's resignation, the USL board appointed independent director Mahendra Kumar Sharma as the new chairman with effect from Thursday.
As part of the agreement, USL will pay Mallya $75 million over a five-year period, including $40 million (Rs.275 crore) this year and $35 million over the next four years.
"The agreement puts in place a five-year global non-compete and non-interference by Mallya, ends Diageo's prior agreement on his position at the company and puts an end to the uncertainty relating to its governance," the notification said.
The initial payment to Mallya will be charged to exceptional items in the year ending June 30, 2016.
Diageo also extended Smirnoff's sponsorship of the Force India Formula-1 team of which Mallya is team principal and part-owner for the next five seasons. Sponsorship cost will continue to be $15 million per season.
"The agreement is in the best interests of both Diageo and USL and allows USL to build on its strong platform in one of the biggest spirits markets in the world," Diageo chief executive Ivan Menezes said in a statement in Bengaluru.
Mallya holds a mere 4.07 equity stake after Diageo bought majority stake (54.7 percent) in 2012 and took control of its operations soon.
For fiscal 2014-15, the company reported net loss of Rs.1,956 crore on standalone basis and Rs.1,687 crore on consolidated basis on a revenue of Rs.8,353 crore.
For fiscal 2013-14, net loss was Rs.5,103 crore on standalone and Rs.4,489 crore on consolidated basis.