United Spirits to mop up Rs 450 crore to clear debt

United Spirits Ltd, the consolidated liquor outfit of the UB group, is likely to raise $100 million (Rs 450 crore) by April 2006 to repay a portion of debt.

The UB group had raised around Rs 1,300 crore debt from the market for the acquisition of controlling interest in Shaw Wallace & Company (SWC). It is likely to raise the money in two-three tranches over a period of one-two years depending on the market condition.

The UB group president and chief financial officer Ravi Nedungadi informed that it is looking into two-three options for raising funds that includes foreign currency convertible bonds (FCCB), public offering and private placement.

It is now discussing the matter with two-three merchant bankers for the fund-raising strategy. "We are planning to raise the entire Rs 1,300 crore in two-three tranches to optimise the mobilisation," Nedungadi said. He was in Kolkata to attend SWC's extraordinary general meeting. According to him, the group is also not pushing the idea to sell some of its brands for raising resources. It may be mentioned that Vijay Mallya earlier said the group could prune the brand portfolio of United Spirits after the operational merger of SWC.

United Spirits is now in the making after the merger of Phipson Distillery Ltd, Herbertsons Ltd, Triumph Distillers and Vintners Pvt Ltd, McDowell International Brands Ltd, Shaw Wallace Distilleries Ltd, United Distillers India Ltd with McDowell & Company Ltd, which is to be rechristened United Spirits. The shareholders of McDowell has recently approved raising of $250 million from the market.

According to UB CFO, the group is now thinking of giving 20-30 regional brands franchisee to its own bottlers instead of selling them. At present, the UB group owns 130 brands, and 75 bottling plants, of which 25 is owned by the group and the rest are franchisee bottlers.

"We have 50 franchisee bottlers. We could lease some brands to them in lieu of royalty. As we think selling out brands could help the competitors and neutralise the effect of the consolidation to an extent," he added.

According to CFO, United Spirits would focus on 50 brands and is likely to reduce emphasis on the rest. It had earlier appointed Accenture for evaluating the brands and shortlisting the power brands in the group's portfolio.

Meanwhile, the group has also appointed KPMG and Hari Bhakti & Company for working on the valuation and, consequently, on the swap ratio for the proposed merger of SWC with United Spirits.