Vijay Mallya barred from accessing securities markets for 3 years, Sebi issues order

Capital market regulator Securities and Exchange Board of India (Sebi) on Friday prohibited fugitive business,man Vijay Mallya from trading in the securities market and from associating with any listed company for three years. Sebi has ordered the freezing of all securities holdings, including mutual fund units. 

The NDA government has been trying to extradite Vijay Mallya, 68, who lives in Britain, to face charges of fraud resulting from the collapse of his defunct company Kingfisher Airlines.

Mallya, who also co-owned the Formula One motor racing team Force India until 2019, has denied all wrongdoing.

As per reports, Mallya, through an FII entity named Matterhorn Ventures, has been involved in trading indirectly in scrips of his group entities in India, thus concealing the true identity of his investments in the securities market.

It is crucial to note that investments made through the FII channel are strictly intended for non-resident Indian entities. The Sebi has highlighted that  Mallya has extensively utilised the FII route to invest, concealing his actual involvement under the guise of FII Matterhorn Ventures. This practice, as stated by Sebi, has been to the detriment of the shareholders of Indian companies.

According to the directive from Sebi, the FII entity in question was utilised to engage in transactions related to the shares of the former spirit company Herbertsons and United Spirits (USL).

Sebi on Friday said that the tycoon's "existing holding of securities including the holding of units of mutual funds... shall remain frozen".

Mallya owns an 8.1% stake in Kingfisher beer-maker United Breweries, per exchange data, and is the company's chairman. He also owns a 0.01% stake in Smirnoff vodka-maker United Spirits. 

Sebi discovered that Mallya's actions were found to be in breach of the provisions outlined in the Foreign Institutional Investors (FII) Regulations. Mallya was found to have engaged in manipulative tactics and utilized deceptive methods while conducting transactions involving securities of publicly listed companies within his group in India.

“…the shareholding of Matterhorn Ventures of 9.98 per cent shares of Herbertsons actually belonged to the promoter category being totally funded by the notice,” Sebi observed.
Through a process of mergers and acquisitions, Herbertsons became USL, which is currently owned by British multinational Diageo.
“Such acts of the noticee are not only fraudulent and deceptive but are a threat to the integrity of the securities market,” Sebi added.

(With inputs from Reuters)