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Pernod Ricard closing sales gap with USL

French liquor giant's gross sales grew in FY14, USL's remained sluggish

Viveat Susan Pinto  |  Mumbai 

maker is closing in on bigger rival Ltd (USL) in sales, thanks to an uncertainty at the latter.

Pernod, the maker of the Royal Stag and Imperial Blue whiskies, has mostly been a profitable company in India but was considered small in terms. That is changing now, gradually.

In the financial year ended March, registered gross turnover of Rs 8,614.5 crore, 19.37 per cent higher than the previous year’s Rs 7,216.4 crore, according to data sourced from analysts tracking the industry and closely following The company is not listed in India. Net has been assumed at half of this at Rs 4,307.2 crore for FY14 versus Rs 3,608.2 crore the previous year.

By comparison, the consolidated net of USL, India’s largest manufacturer, fell marginally during the period — from Rs 10,748 crore in 2012-13 to Rs 10,615 crore in 2013-14.

In terms of bottom lines, Pernod’s net profit grew 18.3 per cent over the previous year to Rs 810.3 crore in 2013-14. During this period, USL, struggling with operations in a weak market, reported a loss of Rs 4,489 crore. The company is now controlled by British liquor giant Diageo, which is attempting to clean up its books after auditors and minority shareholders questioned USL’s accounting practices.

On November 28, minority shareholders of USL rejected as many as nine of the 12 resolutions tabled at the company’s annual general meeting.

Among the rejected proposals were USL’s pacts with entities connected to the erstwhile promoter Vijay Mallya. This included pacts dated September 30, 2011 and December 22, 2011 between USL and United Breweries Holdings Ltd (UBHL) that required UBHL to sell to the firm certain immovable properties.

Shareholders also rejected a loan agreement between USL and UBHL, dated July 3, 2013, and did not approve a licensing proposal tabled by USL to manufacture and distribute Diageo’s ‘Bottled in India’ products. The licensing agreement, said analysts, was a key one since it would have added Rs 600 crore to USL’s turnover, something it badly needs at this stage. Its earnings before interest and tax would have improved by around Rs 60-70 crore, analysts said.

Some other resolutions that did not get the nod included a services agreement, dated July 3, 2013, between USL and Kingfisher Finvest India; and sponsorship pacts, dated June 11, 2013, between USL and United Racing & Bloodstock Breeders, besides another between USL and United Mohun Bagan Football Team Pvt Ltd.

The company is expected to go back to shareholders to again seek their approval on all special resolutions, in an extraordinary general meeting likely to be called in 45 days.

In July 2014, had increased its stake in USL to 54.8 per cent from 28.8 per cent earlier, after its second open offer to public shareholders was fully subscribed. Following this open offer, the world’s largest spirits company, had spent nearly $3 billion (or Rs 18,000 crore) over 2013 and 2014 to acquire an over 50 per cent stake in USL.

In 2013, after buying a 25.04 per cent stake in USL, which triggered the mandatory open offer, had seen just 0.4 per cent of the company’s shareholders tendering their shares — in one of the weakest open offers that year. In 2013, Unilever’s open offer for HUL was subscribed 67 per cent, and GlaxoSmithKline’s offers for GSK Consumer Healthcare and GSK Pharma was subscribed 92 per cent and 100 per cent, respectively.

Diageo, however, is preparing to push its brands aggressively in India, following the acquisition of a controlling stake in USL. The company had in August launched a premium variant of its popular Smirnoff vodka, Smirnoff Black, and then followed it up with the launch of a pre-mixed vodka, Smirnoff Ice. The company also sells brands like Johnnie Walker, Guinness beer and VAT 69.

First Published: Fri, December 05 2014. 00:47 IST