THE deal for Diageo to buy a stake in Vijay Mallya's United Spirits business, which includes Whyte and Mackay, appears to be entering its final stages.

Reports in the Indian press cited unnamed directors and banking sources who suggested the agreement could even be announced as early as this week.

However, one executive familiar with the discussions told the AFP newswire that while a "deal makes sense, there is still no certainty".

The two companies released a joint statement in September confirming they were in negotiations but have offered no official update since then.

But prior to last month's F1 Indian Grand Prix, Mr Mallya said he was under "no compulsion" to sell his near-28% holding. Talks between United Spirits and Diageo had previously collapsed in 2009 after the two parties failed to agree on a price.

If the transaction is completed this time around it appears likely Mr Mallya will stay on as chairman, with Diageo choosing the managing director and chief financial officer of the business.

Diageo could have to pay up to $2 billion in order to gain a 51% stake in United Spirits.

Analysts had predicted Diageo would acquire more than half of Mr Mallya's holding in United Spirits and buy shares from smaller investors to build up a 25% stake.

Once it reaches that level, Indian market rules mean it would then be compelled to launch an open offer for at least 26% more of the shares to give it a controlling stake.

United Breweries, United Spirits' parent company, said it was not commenting on how talks were progressing. Diageo also said it was making no comment on whether the deal is getting closer to completion.

Johnnie Walker maker Diageo is thought to be keen on the deal as a way to enhance its presence in the Indian spirits market and add further brands to its substantial portfolio.

Among those would be single malts such as the Dalmore and Jura plus the Glayva liqueur.

Mr Mallya, also part of the Force India F1 team, has said he does not plan to use any proceeds from a sale of United Spirits to prop up the cash-strapped Kingfisher Airlines.

The airline had its flying licence suspended by India's aviation regulator, The Directorate General of Civil Aviation, last month after a staff dispute left it unable to run flights since October 1.

Its workers had not been paid for several months but have now received wages from March and April, with the money due for May expected to be paid in the next fortnight.

Lenders to the airline, including State Bank of India, are expected to meet Mr Mallya and other executives in the coming weeks to put together a revival plan for the airline.