Liquor baron Vijay Mallya today said he is open to selling any level of stake in United Spirits from the treasury stock as long as it is not exceeding the holdings of the promoter, UB Group.
"I am very comfortable with any level of shareholding that a strategic investor such as Diageo may wish to have in United Spirits, as long as their total equity does not exceed the promoter holding," UB Group Chairman Mallya said.
UB Group, the promoter of country's largest liquor manufacturer United Spirits, has around 38 per cent stake in the company. Earlier, Mallya had said that talks were in final stages for a stake sale of up to 14.9 per cent in the group firm United Spirits to the world's number one spirits maker Diageo.
USL's command in the Indian spirits market made it an attractive proposition for the foreign company, he had said. Mallya and his senior team comprising UB Group CFO Ravi Nedungadi, USL President and Managing Director Vijay Rekhi, and USL CFO P A Murali held a meeting with their Diageo counterparts in New York last month for the stake sale.
USL has been hit by a steep increase in input costs, putting pressure on margins. So the company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped by almost a third while net profit was down by 65 per cent, though revenues were up by 17 per cent in the third quarter of the current financial year.
During FY09, the company also bought out Balaji Distilleries, giving USL a direct manufacturing facility in Tamil Nadu which accounts for 15 per cent of all its India revenues. It will also help USL save substantially on taxes. In this situation, the dialogue with Diageo assumes great importance.
Globally, Diageo has brands such as Guinness, Johnnie Walker, Black & White, Smirnoff and Gilbey’s in its portfolio. USL, which accounts for about 60 per cent of the Indian market, owns among others, brands like Black Dog, Romanov, Royal Challenge and Signature. London-headquartered Diageo, which is listed in London and New York, has facilities in the UK, the US, Australia, India and Latin America among others.
