CRISIL reaffirms LT ratings of United Spirits with 'stable' outlook

United Spirits stated that CRISIL Ratings has reaffirmed its 'CRISIL AAA' rating on the long-term bank facilities of the company with 'stable' outlook.

The agency has reaffirmed its CRISIL A1+ rating to the short-term bank facilities of USL.

CRISIL said that the rating reflects the strong financial risk profile of USL, minimal debt, accruals of nearly Rs 1,000 crore and modest capital expenditure (capex) plans of approximately Rs 200 crore.

The rating also factors the leadership position of USL in the domestic Indian-made foreign liquor (IMFL) segment along with strong operating efficiency.

The operating performance has improved in the first nine months of fiscal 2024 with revenues increasing by 5.3% year-on-year, along with improvement in the operating margin by nealy 500 basis points to 19.5% from 14.6% driven by operational efficiencies, change in product mix (increasing contribution of higher margin products) and lower other expenses.

Sales volumes have declined in fiscal 2024 mainly due to few brands under popular segment. However, on like-to-like basis, volumes are expected to grow by 1-2%.

CRISIL Rating expects revenue growth to remain healthy at approximately 10% in fiscal 2024 driven by improving realisations and higher focus on Prestige & Above segment. Margin is expected to sustain over 16% during the medium term, aided by various measures undertaken over the past several years including premiumisation of products and leveraging of fixed overheads.

The ratings continue to reflect a leadership position in the spirits industry in India, strong and diversified product portfolio, and operational and technical support it receives from its parent, Diageo Plc. These strengths are partially offset by exposure to regulated nature of the industry.

United Spirits is the largest Indian spirits company that manufactures, sells and distributes beverage alcohol, producing and selling around 60 million cases of Scotch whisky, IMFL whisky, brandy, rum, vodka, gin and wine. Its portfolio of over 15 brands includes McDowell's No.1, Royal Challenge, Signature, and Antiquity as well as Diageos iconic brands such as Johnnie Walker, VAT 69, Black & White, Smirnoff and Ciroc.

The scrip rose 0.80% to currently trade at Rs 1,158.45 on the BSE.

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