Liquor baron Vijay Mallya has agreed to give up his chairmanship and board position at India's top spirits company United Spirits Ltd, ending months of acrimony with the company's new owner Britain's Diageo Plc.
Mallya sold most of his shares in United Spirits, which was a part of his UB Group, and gave management control to Diageo in 2012. The maker of Johnnie Walker whisky owns about 55 percent of the Indian company.
The businessman, whose other firms include India's largest brewer United Breweries, is under pressure from banks to repay more than $1 billion in loans linked to ill-judged expansion, including his defunct Kingfisher Airlines.
In April last year, the United Spirits board begun a process to remove Mallya as its chairman due to alleged financial irregularities. Mallya had then denied the allegations and had refused to resign.
With Mallya's resignation, Diageo will sever all ties with United Spirits former owners and take full management ownership, after having previously faced setbacks including a legal battle since it paid a high price for the acquisition, hoping India's increasingly wealthy consumers will spend more on alcohol.
Mahendra Sharma, currently an independent director on United Spirits board, will takeover as chairman, Diageo said.
United Spirits has 39 percent of the Indian spirits market, and India is Diageo's second-largest market by sales.
The spirits market in India, Asia's third-largest economy, was worth about $17 billion in 2014, and per capita consumption is expected to grow to 1.8 litres in 2019 from 1.4 litres in 2010, according to research firm Euromonitor.
As part of the agreement announced on Thursday, Diageo will pay Mallya $75 million over a five-year period, which would be provided for as exceptional items in the year ending June 30, the British company said.
The payment takes into account Mallya's resignation, a five-year global, excluding the UK, non-compete agreement, and a pact that he will not pursue any claims against Diageo, United Spirits and their units, the statement said.
A source with direct knowledge of the development said Mallya's resignation would allow Diageo's India business to move on with certainty and good governance, as the company remained focused on commercial opportunities in the country.
Mallya, once known as the "King of Good Times" for his flamboyant lifestyle, sold his shares in United Spirits to Diageo at a time when his Kingfisher Airlines was grounded by debt, safety concerns and unpaid staff.
"The time has now come for me to move on and end all the publicised allegations and uncertainties about my relationship with Diageo and United Spirits Limited," Mallya said in a separate statement issued on Thursday.
"Accordingly, I am resigning (from) my position with immediate effect," said Mallya, whose lifestyle has come under intense criticism in recent months.
The business tycoon remains chairman of United Breweries, maker of Kingfisher beer, in which Dutch brewer Heineken NV is the single largest shareholder with a 42.07 percent stake.