Mint Explainer | Why RBI cancelled NBFC licences linked to Vijay Mallya

These two companies are Kamsco Industries and Pharma Trading Co., which are registered at the same Kolkata address and once held stakes in United Breweries—a company long associated with Mallya.

Mint takes a look at these companies and what their businesses are all about.

RBI’s powers to revoke licences

While the central bank doesn’t specify reasons case by case, it has broad powers under Section 45-IA(6) of the RBI Act to cancel NBFC licences. These include instances where a company has stopped conducting NBFC business, has failed to meet the conditions of its registration, or hasn’t maintained its accounts as required by law or RBI rules.

Emails seeking comment from both companies went unanswered.

An analyst tracking NBFCs said that while RBI doesn’t disclose specific reasons, such cancellations usually happen when companies have no non-bank financing business, have not filed returns for years, or have failed to comply with RBI regulations.

It is estimated that of the over 9,000 NBFCs that RBI regulates, only 200-250 have sizeable businesses with assets of ₹1,000 crore or more.

Who owns these two firms?

RBI records show Kamsco received its NBFC licence on 4 June 1998 and Pharma Trading got its licence a week later. Both lost their licences on 1 August this year, a decision made public by the RBI on 12 September.

Regulatory disclosures list Mallya’s mother Lalitha Mallya, his son Sidhartha Mallya and Tushita Patel, reported to be his former executive assistant, as directors of Kamsco. Lalitha Mallya and Patel also sit on the board of Pharma Trading.

Kamsco’s shareholders included The Gem Investment and Trading Co. and Pharma Trading. Pharma Trading, as of its last available filings in March 2019, had seven shareholders, including Vijay Mallya, his stepmother Ritu Mallya and Talesi Ventures Pvt. Ltd.

Dormant filings and seized shares

RBI data showed that these companies were listed as investment and credit companies (ICC). This category of NBFCs are financial institutions whose primary business is asset finance, providing finance, whether by making loans or advances or for any activity other than its own, and acquiring securities.

Kamsco’s last annual report, for fiscal year 2019, described it as an “investment company” and showed no revenue. It noted that over 2.2 million equity shares of United Breweries held by Kamsco were “unilaterally transferred from the demat account of the company to the demat account of the Deputy Director, Directorate of Enforcement (ED), Mumbai, on May 3, 2018.”

Pharma Trading’s most recent filings, also for fiscal 2019, showed revenue of ₹74,064 and a net loss of ₹1.3 crore. Its report said that over 1.5 million United Breweries shares held by the company were similarly transferred to the ED’s demat account on the same date.

Records from the Registrar of Companies show these companies are still listed as active.

In June 2021, news agency Press Trust of India reported that the ED had transferred 41.3 million United Breweries shares, then valued at more than ₹5,600 crore, to a debt recovery tribunal. That same month, The Indian Express reported the tribunal sold those shares to Heineken N.V. on behalf of a consortium of lenders trying to recover their dues from Mallya.

The status of recovery

In June this year, Mallya broke a nine-year public silence, telling a podcast that he had been denied a fair trial and was the victim of media sensationalism and political scapegoating. He claimed he owed only ₹6,203 crore to banks but that the finance ministry has reported recovering ₹14,131.6 crore—“multiple times over.”

Citing the podcast, Mint reported on 7 June that while Mallya has legal options to return to India and settle the outstanding cases, “it won’t be a smooth landing.”