United Spirits Net Worth Dents By Rs 3,693 Crore
Waseem Ahmad / 03 Jun 2014
India’s largest spirits company United Spirits (USL) is selling its subsidiary, the Scottish Whyte & Mackay to reduce the loan burden of the company. The move will dent into USL’s net worth by Rs 3,690 crore.
United Spirits (USL), India's largest spirits company, has taken one more step towards selling its Scottish subsidiary Whyte & Mackay (W&M) by making a provision of Rs 4,600 crore. It is expected that the said provision will pare USL's net worth by Rs 3,690 crore (due to write off the goodwill). But the said provision to write-off will require the Reserve Bank of India's approval.
The company is selling its subsidiary (Scottish Whyte & Mackay) to reduce loan burden on the company. As on December 31, 2013, USL's total debt stood at Rs 7,793 crore, of which Rs 3,267 crore belonged to its overseas arm USL Holdings (UK). Post sale, it is expected that the sale of W&M will help USL to reduce its debt and due to this its interest expenditure will also come down by Rs 130 crore to Rs 160 crore p.a which will boost the company’s bottomline by Rs 90-103 crore p.a.
If we look at some of the snapshots of Whyte & Mackay deal, in year 2007, USL had acquired Whyte & Mackay for about USD 1.2 billion using the borrowed fund. To acquire the W&M, USL raised debt of USD 618 million from Citibank London and USD 543 million from ICICI Bank in London. On May 9, 2014, USL had announced to sell Whyte & Mackay for £ 430 million (Rs 4,260 crore) to a subsidiary of Philippines-based Emperador Inc.
Currently, USL Holdings (UK) owes an aggregate USD 620 million (Rs 3658 crore) to Standard Chartered Bank, RaboBank International and DBS Bank. USL has said as a result of these, the total support, including interest payment and principal, stands at Rs 4,793 crore.
USL has further said that, net proceeds of £ 408 million (Rs 4042 crore) from the sale of Whyte & Mackay will be insufficient to repay the Intra-USL loan of Rs 4,793 crore, as on March 31, 2014. "The company is required, pursuant to mandatorily applicable accounting standards, to impair its investment in USL Holdings BVI by about Rs 2.2 crore and provide for the Intra-USL Group loan to the extent of Rs 4,652 crore to be further netted off by a write-back from foreign currency translation reserves of Rs 963 crore," USL said in a regulatory disclosure, part of a move to seek shareholder approval.
At CMP of Rs 2844.10 the stock is trading at 115x of its trailing 12-months earning.
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