Moneycontrol
Nov 11, 2012 05:58 PM IST | Source: Moneycontrol.com

Should Diageo shareholders switch to United Spirits?

After long speculation, Vijay Mallya owned United Spirits, United Breweries Holdings and Diageo finally sealed the deal, which will see Diageo, the world‘s largest spirits company, acquire a majority stake in United Spirits, which controls half of India‘s liquor market.

 
 
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Riken Mehta
Moneycontrol.com


After long speculation, Vijay Mallya owned United Spirits, United Breweries Holdings and Diageo finally sealed the deal, which will see Diageo, the world’s largest spirits company, acquire a majority stake in United Spirits, which controls half of India’s liquor market. India is the leading guzzler of whiskey and analysts expect it to be USD 10 billion market by 2013.


Also lofty import duties in India would have made life difficult for Diageo to enter the domestic market as a standalone player. United Spirits acquisition will give Diageo a platform to launch all its brands in India.


Both the firms have some of the best brands in the liquor market, excellent distribution networks in India (United Spirits) and abroad (Diageo), so there will definitely be immense synergies from the deal. As seen from the chart, United Spirits has given 2840% return for investors since 2003 compared to Diageo's 158%.


Here’s a look at the key financials of the two firms. Exchange Rate: 1 GBP = Rs 86.81. Diageo Year end June 2012.



ParametersUnited SpiritsDiageo
Annual Sales FY12

Rs 9186 Cr

Rs 93408 Cr

Net Profit18717970
OPM11.55%29.30%
NPM1.98%19.23%
Cash3639011
Market-Cap17784390645
Debt752365715
Interest Cost8363316
Market Share59%
CAGR Growth 13%
Sales (Cases)122 Mn156.5 Mn
BrandsDalmore, Jura, Whyte & MacKay, Black Dog, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Bagpiper, Celebration Rum, Bouvet Ladubay, Pinky, Romanov, White Mischief, Four SeasonsJohnnie Walker, Crown Royal, J&B, Buchanan’s, Windsor, Bushmills, Smirnoff, Ketel One, Cîroc, Captain Morgan, Baileys, Jose Cuervo, Tanqueray, Guinness

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