CCI nod for sale of Mallya-owned distillery in Chennai

The Competition Commission of India (CCI) has cleared the sale of distillery owned by Vijay Mallya-led United Spirits Ltd (USL) near Chennai to Enrica Enterprises Private Ltd (EEPL).

Through the acquisition, the promoters of EEPL are planning to enter the business of manufacturing the India-made foreign spirits.

The deal involves transfer of USL’s entire undertaking, business activities and operation of its unit at Poonamalle, Chennai. The unit is a distillery for manufacture of Indian-made foreign spirits (IMFS) to EEPL by way of slump sale. The sale consideration was estimated to be Rs 125-crore.

The distilling plant has a capacity for one-million cases a month, and it was acquired by USL nearly five years ago from Balaji Distillers. It was reported that USL was operating this plant at around 55 per cent capacity thus being a drain on the company.

Enrica would make certain IMFS brands of USL using technology and know-how and under the trademark of USL, according to a franchise agreement signed on December 4, 2013, along with the master sale agreement between the two companies.

Pursuant to the agreement, Enrica will bottle USL's brands and in consideration for this bottling arrangement, USL will earn a royalty income.

In the order, the CCI said: “Considering the facts on record, the details provided under the Act, the Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore the Commission hereby approves the proposed combination.”

While the Mallya-promoted USL is a listed company, EEPL, which is a private entity, is promoted by Spurthi Holdings Pvt Ltd, Viki Investments and Properties LLP and Sree Shyam Sayi Investments and Traders Pvt Ltd. The private entity has diversified business interests and now proposes to enter the business of manufacturing IMFS through this acquisition.