USL adds Rs 925.5-cr net debt in Apr-Dec FY11

United Spirits, the flagship spirits company of UB Group, has witnessed a rise of Rs 925.5 crore in its net debt level in the first nine months of the current financial year, as it continues to invest in growing its business.

The company’s net debt level increased to Rs 5,663.1 crore by end of December 2010 compared to Rs 4,737.6 crore by end of March 2010, a leverage of around 1.4 times. The company has also seen a rise of Rs 726.2 crore in its gross debt to Rs 6,232.4 crore in the first nine months of the current financial year.

The interest charges for the company has also increased in the third quarter ending December. “Interest charges in the third quarter are up by 38 per cent to Rs 103.8 crore as compared to Rs 75 crore in the same period last year,” the company said. However, USL witnessed a decline in interest charges by 16 per cent to Rs 362.5 crore in the first nine months of the financial year.

Industry experts said though the deleveraging attempt of the company had shown desired outcome in the recent past, the company had added more debt on account of furthering business growth.

In July 2009, USL had taken concrete steps to deleverage its balance sheet, which had a debt of Rs 7,100 crore, with debt-equity ratio of three times at that point of time. The company raised close to Rs 950 crore through an open market sale of 10.28 million treasury stocks at an average price of Rs 890 per share to investors. Further, the company raised Rs 1,615 crore in October 2009 through qualified institutional placement (QIP) to investors at Rs 913.7 per share. The proceeds from these issues had been utilised to part repay the debt towards Whyte & Mackay acquisition.

Referring to the rise in net debt level, a top company official, who didn’t wish to be named, said, “Of course, there is rise in net debt level in the first nine months of the financial year, however, the debt taken to book are meant for business expansion with the potential of throwing significant cash flow in the near future.” He said the company’s debt-equity ratio remained at a comfortable level along with a treasury stock worth around Rs 950 crore with the company.

United Spirits Ltd, the spirit arm of UB Group owned by Vijay Mallya, registered a 34 per cent rise in its net profit to Rs 129.96 crore in the third quarter ending December of the current financial year on the back of higher sales of its flagship brands. Total revenue of the company rose by 45 per cent to Rs 1969.40 crore during this period.