United Spirits gets Karnataka HC nod to hive off Chennai unit

Hiving off is to keep the company's brand presence in Tamil Nadu, it had said earlier

United Spirits Ltd has said that the High Court of Karnataka, Bengaluru, has sanctioned the Scheme of Arrangement to hive off its distillery unit in Chennai to Enrica Enterprises Pvt Ltd. The company has earlier received nod from the Competition Commission of India and the Madras High Court to the Scheme, according to reports.

The company had earlier said, in a court convened meeting, that the government agency in Tamil Nadu, the Tamil Nadu State Marketing Corporation (TASMAC), which operates as the sole buyer of alcoholic beverage products from the manufacturer has been giving less ordering preference to the company's national brands since December 2012, by favouring local offerings. This has affected the company's market share and profitability.

As per the proceedings in the meeting, the decision is to hive off the unit and operate under a royalty arrangement in Tamil Nadu. The hived off unit will continue to operate as a contract unit for the company, producing the company's brands on a royalty basis so that it would continue to have brand presence in Tamil Nadu.

In terms of the Scheme, the appointed date is April 01, 2013 and the Scheme shall become effective upon filing the certified copy of the Order of the High Court of Karnataka with the Registrar of Companies, Karnataka, by the Company. The certified copy of the order is awaited. "The Company will take all necessary steps to make the Scheme effective / operational," said a regulatory filing.