Mallya's USL set to close next round of fund-raising

United Spirits (USL), India’s largest spirits firm controlled by billionaire Vijay Mallya, is closing in on a deal to raise around Rs 800 crore through the private equity route. This move to raise funds comes nearly a month after the company raised around Rs 900 crore through a stock sale in the open market.

USL has been active in trying to reduce its Rs 7,200-crore debt burden, which is leveraged close to three times. Industry sources indicate that it is in advanced negotiations with global private equity funds KKR and Capital International to raise the second round of funding.

Company officials add that in addition to the PE route, Qaulified Institutional Placements and Global Depository Receipts are other instruments which may be explored.

USL is expected to offload a part of its treasury stock for the second round of fund raising. The company had sold 10.2 million shares held under treasury stock at just under Rs 900 a share to a clutch of investors in late June and the entire proceeds will be used to settle a part of its debt pile.

USL had borrowed $625 million to acquire Scotland-based Whyte & Mackay for around $1.2 billion during 2007 and it had to repay $115 million during 2009.

During May, USL made a payment of $45 million and on top of that it is understood to have made an additional $70 million payment during July, which was actually due during November.

On top of the $115 million actually due during 2009, USL will be paying back an additional $200 million within a month. As against a repayment obligation of $115 million, USL would have paid back $315 million during 2009.

If USL succeeds in raising another Rs 800 crore in the near future and uses it to settle debt, it would have paid back a total of Rs 2,200 crore of the Rs 7,200-crore debt.

These moves to deleverage the company come even as its attempt to forge a strategic relationship with global spirits firm Diageo is not getting finalised. Various anti-monopoly and valuations issues are being discussed. “We need a strategic partner at a global level and it may be with Diageo or with someone else,” noted a company official.