USL raises Rs 950 cr by selling 10 mn Shaw Wallace shares

Plan to reduce leverage this year by a third; more fund-raising to follow.

United Spirits, the flagship firm of the UB Group owned by Vijay Mallya, has raised close to Rs 950 crore through an open market sale. Shaw Wallace, USL’s subsidiary, today sold 10.28 million shares held under USL’s treasury stock at an average price of around Rs 890 a share to investors.

This money will be used to settle a part of its debt, which is at Rs 7,500 crore, a leverage of nearly three times. USL has a total of 18.6 million shares under treasury stock and the remaining ones will be used at a later stage to further pay back the debt.

A K Ravi Nedungadi, President & CFO, UB Group, said the company had raised Rs 2,985 crore debt to acquire Scotland-based Whyte & Mackay for around Rs 5,730 crore during 2007. During 2009, USL had to repay Rs 549 crore. “During May, we made a payment of Rs 215 crore and on top of that, we are making an additional Rs 334 crore payment during July, which is actually due in November. In addition to Rs 549 crore which is actually due during 2009, we are paying back an additional Rs 955 crore within a month from this sale. As against a repayment obligation of Rs 549 crore, we would have paid back Rs 1,500 crore during 2009,” he said.

This is part of a deleveraging plan by United Spirits and the company may look at other instruments, including QIP, GDR and private equity to further pare the debt. USL is looking to raise around 1430 crore through the second round of fund raising, which is “expected in a few months time.” With these initiatives, USL would have paid back a total of Rs 2,200 crore of the Rs 7,500 crore debt, giving itself a much need relief. USL, post these moves, will have a debt of Rs 5,500 crore, a leverage of around two times.

These moves come even as its attempt at 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,” said a company official.

In the last fiscal, USL posted a top line growth of 22 per cent, to Rs 4,058 crore on strong growth in volumes, while its net profit dipped 18 per cent to Rs 309 crore, on interest pay out and cost push across raw material.