Pernod Ricard breached the Indian capital’s alcohol policy by financially subsidizing retailers who in turn stocked more of the French company’s brands and increased its market share, the country’s financial crimes agency claims.
India’s law enforcement department said in court documents filed in November that Pernod India provided corporate guarantees worth 2 billion rupees ($25 million) in 2021 to its HSBC bankers, and then asked it to facilitate loans to retailers who used the funds to bid. . Liquor store licenses in New Delhi.
The documents reviewed by Reuters said Delhi government policy prevented manufacturers from participating directly or indirectly in retail sales and that Pernod was “offending” because it actively used bank guarantees to invest in retailers.
The documents are not public and details of the allegations against Pernod have not previously been released.
India has strongly denied the administration’s allegations, Pernod Ricard said, adding that it “will continue to cooperate fully with the Indian authorities in this matter”.
Binoy Babu, head of global brands at Pernod India, was arrested in November and remains in jail over the case. She faces allegations of money laundering under Indian laws and violating Delhi’s alcohol policy rules, but has denied any wrongdoing. Babu, who has not been charged, is seeking bail and will appear in a court in New Delhi on January 19.
In his insurance document, seen by Reuters, Babu claims his arrest was “unlawful” and played no role in Perno’s decision to extend the company’s warranties. Babu could not be reached for comment and his lawyer did not respond.
The court documents do not allege any wrongdoing on the part of HSBC. The bank said in a statement to Reuters that it could not comment on the matter, which is “under investigation by the authorities”.
The Law Enforcement Directorate and the Delhi city government did not respond to requests for comment.
The investigation adds to Pernod’s ongoing business and regulatory challenges in India. The maker of Chivas Régal And Absolut vodka last year challenged a $250 million federal tax order that allegedly dumped the imports, saying it did not agree with the method used to calculate the tax owed.
Reuters reported last year that the government pressured Prime Minister Narendra Modi’s office to resolve his numerous tax disputes.
Pernod sees India as a key growth market with a market share of 17%. Alors que la part of the New Delhi marché seule n’était pas disponible, des sources de l’industrie affirment que le capital est crucial for every entreprise car il s’agit d’un pôle touristique urbain et aisé qui agit as a marché d ‘Catering.’
Market share jumps
In return for financial support from Pernod, the New Delhi retailers who took out the loans had to “guarantee” that 35% of their stores’ inventory would be Pernod’s products, the investigating agency said in its documents. She said her clients interviewed executives from HSBC and Pernod during the investigation.
Some retailers took out Pernod-backed loans and stocked more of its products, the agency said, and the liquor giant’s market share rose from 15% to 35%.
An agency document dated November 26 says the arrangement “establishes a clear intent by Pernod Ricard to participate in the brand push and (gain) illegitimate market share.”
Pernod has not commented on these specific allegations.
In 2021, hundreds of shop licenses have been awarded to private actors as the city government exits the retail business in an effort to liberalize trade and increase local government revenue.
Under this policy, brewers were prohibited from applying for retail licenses to avoid unions that would incur higher fees and push the brand.
Bids worth 90 billion rupees ($1.1 billion) were received at that time. Delhi dropped this policy last year, and alcohol is now only sold in government-run shops.
The allegations against Pernod and Babu are part of a broader investigation by the Enforcement Branch into alleged wrongdoing in policy enforcement by retailers, politicians and businessmen.
One of the documents of the Enforcement Service dated November 10 states: “Pernod Ricard’s main motive in creating the cartel was to get retail stores in collusion with the cartel to buy a larger quantity of Pernod Ricard’s trademarks…instead of the financial assistance provided.”
Court documents show that a senior HSBC banker told federal agents during cross-examination that the bank had received a decision from the Pernod Ricard India board of directors to issue guarantees to retail financial loan companies considering bidding for licences.
Reuters could not independently confirm that HSBC had obtained a decision from Pernod’s board.
Babu told investigators that an offer to issue the company’s guarantee was shared internally with Pernod India’s legal and financial teams, and that the company had done due diligence, documents show.
However, the federal agency said in the documents that Pernod failed to conduct due diligence before granting the loans and that the company did not take any safeguards to protect its interests.
The documents did not say whether HSBC checked collateral and disbursed loans in accordance with Delhi’s liquor policy, or whether it checked whether Pernod had collateral for collateral. HSBC declined to comment, citing the ongoing investigation by the authorities.
The documents showed that Pernod Ricard India’s CFO Richa Singh told the agency during cross-examination that “it was better to take the guarantees given the huge amount of guarantee given by the company”. “given company”. Singh did not respond to a request for comment.