United Spirits extends gain; up 10% in three days

The stock moved higher by 5% to Rs 2,600, extending its 5% gain in past two trading sessions on the BSE.

Shares of United Spirits have moved higher by 5% to Rs 2,600, extending its 5% gain in past two trading sessions on the BSE, after reports suggested that Diageo is considering the possibility of increasing its stake in the company from the existing 55.06% to 72% through open market transactions.

However, the company has denied these reports and clarified to stock exchanges that it is not aware of any such development. READ THE CLARIFICATION HERE

The stock hit a 52-week low of Rs 2,232 in February this year, has corrected 42% from its 52-week high of Rs 3,870 touched in May last year.

The current market price of Rs 2,600 is at a discount of 14% to the earlier open offer price of Rs 3030.

Diageo had raised its stake in United Spirits from 28.78% to 54.78% in 1QFY15 via an open offer, which was at a premium of 18% to the then prevailing market price.


At 12:18 pm, the stock was up 5% at Rs 2,592 on the BSE as compared to 0.75% rise in the S&P BSE Sensex. A combined 427,240 shares changed hands on the counter on the BSE and NSE so far.

Meanwhile, Motilal Oswal Securities has maintained a ‘buy’ rating on the stock with target price of Rs 4,000.

“The stock has corrected 30% in the last one year on account of policy headwinds as a result of Kerala’s proposed liquor ban (staggered ban) and more recently by Tamil Nadu (key political parties in the state have promised prohibition if voted to power). Prohibition on liquor was implemented in Bihar in April-16 as the ruling party fulfilled its promise made during the elections,” the brokerage house said in a report dated May 4, 2016.

“Despite the near-term negative news flow related to policy actions by various state governments, our positive long-term investment thesis on United Spirits remains intact, in view of its improved portfolio mix and resulting margin expansion, debt reduction with further divestment of non-core assets, better capital discipline, improved corporate governance and cost containment,” added report.