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Backed by a sharp increase of almost five times in other income and a healthy forex gain, United Spirits, India's largest spirits major, reported an impressive 2.4 times increase in net profit to Rs 94 crore for the second quarter of FY14 as compared the corresponding previous year.
The impact of sharp increase in other income was so huge that net profit increased despite a 8% drop in its revenues to Rs 2,057 crore on weak offtake in volumes.
Volumes in its mass segment range of brands, which account for as much as 72% of its total sales, dropped by 7% and overall, the portfolio saw a volume of drop of little over 1% as its premium brands pitched in strongly to grow by 22%.
Diageo, the global spirits major, which picked up a strategic 25.02% stake early in July, has been working on revamping the balance sheet of the company. The expenses have been on a tight leash and are being restrained by a good 7% in a highly volatile environment of input costs for alcobev companies in India.
United Spirits had recieved an infusion of as much as Rs 2,400 crore when Diageo picked up the stake. Of which, close to Rs 1,900 crore has been paid out to reduce debt as a result of which the finance costs too have come down.
Attempt to sort out issues in Tamil Nadu:
United Spirits has decided to transfer its business, activities and operations pertaining to one of its main distillery in Chennai to Enrica Enterprises by way of slump sale on a going concern basis for a consideration Rs 125 crore.
In addition to this, USL has decied to go in for a franchise agreement with the Enrica Enterprises pursuant to which the Enrica will bottle the Company's brands and in consideration for this bottling arrangement, USL will earn royalty income.
