UB group plans to go in for a share buyback from the proceeds of the sale of all its non-core businesses including Aventis, Hoechst and Mangalore Chemical & Fertilisers.
"We could either go in for a buyback or pay dividends once we complete the sale of our non-core assets," A K Ravi Nedungadi, president, finance, said.
The sale of non-core businesses would be undertaken once the joint venture with Scottish & NewCastle is in place and acquisitions of breweries are completed. Depending on the market conditions then, the group expects to undertake the selloffs.
Earlier, the liquor major was planning to wipe off its debts and fund expansion plans from sale of non-core assets but with Scottish & NewCastle being roped in as a partner, the group is now examining a proposal to buy back shares. The move is expected to boost investors' confidence and help the group remain focused on its core business instead of using these funds to diversify into unrelated businesses. Nedungadi however, ruled out any plans to float a rights issue to raise more funds.
The UB Group had earlier said that it expects to mop up around Rs 400 crore from sale of its non-core businesses including Mangalore Chemical & Fertilisers and stake in Hoechst and Aventis.
Proceeds from these disinvestments would have eliminated UB's debt and it still have around Rs 100 crore in excess.
The group expected to rake in at least around Rs 100 crore from sale of Mangalore Chemicals & Fertilisers, around Rs 200 crore from sale of 10 per cent stake it holds in Hoechst Ltd and other pharmaceuticals companies.
Currently, MCF is debt-free and has positive net worth and has earned profits. The group had two options with regard to MCF. Either it could nurture the investments in the company which may require more investments or sell off the company.
Nedungadi said the group was not desperate to sell off MCF as it happened to be the only fertiliser company in Karnataka and already around Rs 35 crore had been pumped into the venture. With regard to the 10 per cent stake in Hoechst and Aventis, sell off its stake at an appropriate time and expects at least around Rs 200 crore from its sale.
Once the joint venture is in place, UB group will have three arms. BrewCo which will control nine breweries, 98 per cent of Mangalore Breweries, 65 per cent of Associated Breweries & Distelleries Ltd, 40 per cent of the joint venture company which will in turn control Inertia, GMR and other breweries. The second arm will be the South African-based United National Breweries and the third arm consists of McDowells, Herbertsons, land, and Aventis Pharma, Aventis Agro, Hoechst and MCF.
Scottish & NewCastle will pump in Rs 250 crore into Brewco and for a 40 per cent stake in the new venture it will pump in around Rs 60 crore and invest around Rs 110 crore in the JV in return of non-voting shares.
