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Bangalore/Mumbai: Vijay Mallya’s conglomerate UB Group is in danger of falling apart.

The man who likes to be called the ‘King of good times’ runs the risk of being left without an empire.

With Dutch brewer Heineken NV buying additional shares in India’s top brewer United Breweries Ltd (UBL) earlier this week, all operational UB Group companies, except for UB Engineering Ltd, have different majority shareholders—and in each case, Mallya has ceased being the single-largest shareholder sometime in the past year.

Asked about the prospect of his losing control of the group, Mallya replied: “All rubbish".

UBL said in a regulatory filing on Thursday that lenders holding UBL shares pledged by Mallya as collateral against borrowings had sold some of those shares. Consequently, Kamsco Industries Pvt. Ltd, a promoter entity, now holds 2.356% in UBL, down from 3.7%.

Mallya’s stake in UBL is now roughly 36%, down from 37.41% earlier, according to BSE data. And at least some part of Mallya’s stake is pledged with lenders.

At a group level, UB has debt of over 19,000 crore across companies. This includes 7,000 crore on the books of the now-grounded Kingfisher Airlines Ltd. Reserve Bank of India Governor Raghuram Rajan has asked lenders, many of them state-owned banks, to get tough with defaulting borrowers—cause for alarm for businessmen such as Mallya who have in the past managed to extract sweetheart loan restructuring deals from banks without losing control of their companies.

Heineken bought an additional 1.35% in UBL from the open market on Tuesday, raising its stake to nearly 39%.

“I can confirm that we have bought a block of shares in UBL on Tuesday (1.3%). This now makes us the largest shareholder (in UBL). We went from 37.4% to 38.7%. This is a relatively small movement that does not materially change the ownership structure. It is very much business as usual for all parties," Christine van Waveren, spokesperson at Heineken said.

“These shares were offered to us by Citibank; as a long-term partner in UBL it made sense for us to buy them. We believe in the Indian beer market and UBL’s long-term future and want to increase our exposure to the potential future upsides," Christine said without elaborating.

A UB spokesperson did not immediately respond to questions seeking comment.

This year, lenders to the grounded Kingfisher Airlines and other UB Group companies have sold hundreds of crores worth of pledged shares of UB Group companies to recover their borrowings.

Because of this, and the stake sale by Mallya in United Spirits Ltd (USL) to Diageo Plc., the former billionaire has lost part of his ownership in UB Group companies.

Mallya has investments in the UB Group companies through his holding firm, United Breweries (Holdings) Ltd (UBHL) and other promoter entities.

There are five big UB Group companies: UBL, spirits maker USL, Mangalore Chemicals and Fertilizers Ltd, UB Engineering and the grounded airline Kingfisher Airlines Ltd.

A majority of Mallya’s remaining ownership in firms such as UBL, spirits maker USL, Mangalore Chemicals and Fertilizers and even UB Engineering, is pledged with various lenders including the State Bank of India.

Over 60% of Mallya’s current stake in UBL and nearly all of his 11% in United Spirits is held by lenders as collateral. The lenders also hold 52% of his shares in Mangalore Chemicals.

Even in UB Engineering, 90% of Mallya’s shares are with lenders, according to Mint Research and BSE data.

“Unlike in the past, when UB was an operational conglomerate in different businesses, now it has become largely an investor conglomerate. In most businesses, it is now practically an investor and not necessarily in operational control at key companies," said Nikhil Vora, managing director at IDFC Securities.

“UBL and USL both operate in businesses which are government-dictated so it helps if you have an entrepreneur like Vijay Mallya. But both companies are fairly mature now and for many investors there have been transparency issues with the UB Group. So to get global leaders like Diageo and Heineken, who can take the businesses to the next level, will only increase the investor appetite for these companies, “ he added.

There have been increasing pointers of Mallya’s waning influence on UB Group companies.

In August, Diageo, which bought a 25.02% stake in USL in July, shifted as many as 100 UB Group executives off USL payrolls to UBHL.

From Friday, the email ids of United Spirits employees will change to @unitedspirits.in from @ubmail.in, a person familiar with the matter said.

At Kingfisher Airlines, Mallya is at the mercy of lenders who have filed petitions to wind up UBHL and moved the Debt Recovery Tribunal against Kingfisher. Last month the Karnataka high court admitted a winding-up petition filed by BNP Paribas against UBHL.

The court rejected a petition on Wednesday by Kingfisher challenging the move by a consortium of lenders to take possession of its “Kingfisher House" property in Mumbai.

Mallya said on 24 September that Kingfisher was in talks with a “foreign" investor to get funds for a re-start and may conclude the discussions within 90 days.

Analysts, however, have expressed doubt if Kingfisher will fly again.

Mallya also said then that he was interested in buying back shares in Mangalore Chemicals from Deepak Fertilisers and Petrochemicals Corp. Ltd, the company’s largest shareholder, and from Zuari Fertilisers and Chemicals Ltd, another company which has built a large stake in Mangalore Chemicals this year.

However, he has not specified how he would fund any share purchases.

While the transfer of majority ownership and, eventually control, to someone else, will mean that Mallya no longer has to worry about the loans on the books of his companies, he will still have to extricate himself from the personal guarantees he has given several lenders.

“There’s a fair bit of value in the investments of the UB Group in UBL and USL. Whether they will be able to retain a significant part of the remaining investment is debatable given that the court cases and that the group liabilities remain high (related to Kingfisher)," Vora said.

Shares of United Breweries closed at 813.80, up 2.85%, on Thursday, while the BSE’s benchmark Sensex ended the day at 20,925.61 points, down 1.16%.

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