UB stocks gain up to 57%, outshine Sensex

Experts say the rally in UB group shares driven by speculations about stake sale in United Spirits to save Kingfisher Airlines

Shares of some UB group firms have rallied as much as 57% since the beginning of the current fiscal, even as the debt-ridden Kingfisher's stock has mostly languished in the recent months.

In all, five companies of Vijay Mallya-led UB Group have outperformed the BSE 30-stock index, Sensex, where the gain has been less than 6% so far in 2012-13.

Shares of group holding firm UBHL (United Breweries Holdings Ltd) have shot-up by 57%, while United Spirits Ltd skyrocketed 52.17%, mostly on speculations about possible stake sale in the company.

Shares of McDowell Holdings have also surged 47.2%, while United Breweries scrip rose by 16.91% and Mangalore Chemicals & Fertilizers climbed 7.96%.

In contrast, the Sensex has risen 5.82%.

Besides Kingfisher Airlines, UB Engineering is another group stock to have given negative returns this fiscal.

Kingfisher Airlines and UB Engineering saw their share prices decline by 10.92% and 10.99% respectively during the period under review.

According to market experts, the main driver behind this rally in UB group shares has been speculations about stake sale in United Spirits to save Kingfisher Airlines.

"Speculation has been rife on an imminent stake sale that kept Mallya-controlled companies' shares on a high spirit at the bourses," CNI Research CMD Kishore Ostwal said.

Kingfisher's net loss more than doubled to Rs 2,328 crore in 2011-12, from Rs 1,027 crore in the previous year.

The airline has a debt of over Rs 7,000 crore.

As per reports, UB Group is also looking at offloading stake in Whyte & Mackay (W&M).

"UB group stocks are rallying mainly due to stake sale reports and hopes of FDI implementation in aviation, which is likely to help debt-ridden Kingfisher," Alex Matthews, Research Head Geojit BNP Paribas said.

According to Gajendra Nagpal, Unicon Financial Solutions, CEO, the rally is not likely to sustain in the long-run given there is not much steam left, which can further fuel the rally in these stocks.

Late last week, the government allowed 49% investment by foreign airlines in aviation -- a long-awaited move by Kingfisher to help it raise capital by bringing in a strategic partner.