United Spirits has denied reports that it has provided a guaranteee to the ailing Kingfisher Airlines, as questions mount over owner Vijay Mallya's options for both businesses.

Concerns are growing over the extent to which Mallya might seek to prop up the stricken Kingfisher business with other parts of his empire. Of those, United Spirits generates the most cash.

Today (24 February), United Spirits was forced to deny that it is acting as a guarantor for Kingfisher, as suggested by the Business Standard newspaper. "United Spirits Ltd has clarified to Bombay Stock Exchange that United Spirits Ltd has not provided any corporate guarantee on behalf of Kingfisher Airlines Ltd," said the group.

It is the latest twist in Kingfisher's struggles within Mallya's UB Group. In order to secure shareholder backing for a US$225m bond issue, United Spirits was forced to state last month that the funds will not be transferred to the airline.

Still, some analysts suspect that Mallya has been using cash from elsewhere in the UB Group to help Kingfisher. In addition, United Spirits itself remains highly indebted.

According to an article in India's Business Standard newspaper this week, United Spirits' CFO, Pathai Murali, said that the firm faces a "tight rope walk" until it can "monetise" assets.

There is growing speculation that United Spirits' own precarious finances may force it to sell a stake in its business. "Diageo would love to have a stake in that business," one analyst told just-drinks. However, previous talks between those two firms broke down in 2009, due to differences over the size of stake Diageo might acquire and the potential price tag.

The analyst, who did not wish to be named, said that Diageo might only return to the table if Mallya offers a deal similar to his tie-up with Heineken at United Breweries. Both Heineken and Mallya hold a 37.5% stake in the brewer.  

"It would probably have to be equal shareholdings, which Mallya would be very reluctant to do. But, in the end, he may not have a choice," said the analyst.

A spokesperson for United Spirits was not available for comment when contacted by just-drinks today.