McDowell gets EoIs for up to Rs 850 crore

McDowell and Company, the Rs 1,900 crore spirits arm of the UB Group which is in the process of getting consolidated into United Spirits, has received expressions of interest (EoI) from multiple international investors and agencies for investments ranging from $100 million to $200 million at an attractive valuation, said Vijay Mallya, chairman UB Group.

Announcing this at McDowell's AGM in Bangalore on Friday he said: "There have been a lot of interest from strategic and financial investors and these proposals will be considered by the board at an appropriate time."

He added that the consolidated spirits firm will have a majority market share of 52 per cent and will be the second largest spirits company in the world after Diageo.

The combined entity will have sales of Rs 3,000 crore in FY06 and the consolidated EBIDTA for the year is expected to be around Rs 275 crore.

Talking about the business benefits of this consolidation, Mallya said this will yield significant upsides in topline and bottomline due to increased bargaining power with monopolistic customers, government and private, who account for 65 per cent and 16 per cent of the market respectively.

"Significant savings will be realised through realignment of value chain thereby reducing the disproportionate share of industry profit currently retained by distribution. This move will also give increased bargaining power with supplier of key inputs," Mallya detailed.

The process of operational integration, he said, is well underway and is being facilitated by Accenture.

The company has also obtained shareholder approval to raise debt of up to Rs 5,000 crore and raise the FII stake limit to 49 per cent from the present 26 per cent, Mallya added.