United Spirits raises Rs 1,100 cr via treasury stock sale

Q: All this capital raising has raised the question on whether you are indeed going ahead with or being successful in that strategic stake sale with Diageo? Is that on the cards or you think that has stalled, for which you are now seeking other alternatives like what you did this morning to raise capital and deleverage the balance sheet?

A: I personally, strongly believe and the board also is of the same view that United Spirits needs a strategic investor and it needs a strategic tie-up. What we are trying to do is de-link the deleveraging from the strategic tie-up. So my answer is that I very much see a strategic transaction happening. But, we also wanted to take advantage of the buoyancy in the financial markets to immediately deleverage. We will pursue this strategic option appropriately and hopefully get better value for it as well. 

Q: Just asking you about two other revenues which have also been on the table, you will do the QIP as you indicate, maybe upto USD 250 million, but would you be considering and talking to people for a 49% stake sale in White and Mackay or raising any money on the Kingfisher Airline's balance sheet?

A: About White and Mackay, from the time we made the acquisition we had ring-fenced that asset and its cash flow. But, we had also stated our intent that we do not wish or feel at it is strategically important to retain 100% share holding there. Therefore, it's not out of question that we would do something on White and Mackay. But as of this point, we haven't really looked at that quite yet. The funding on White and Mackay is on very long term basis, it is a 9-year tenure loan. So there are no compulsions there. The Scotch Whiskey market continues to be firm and comfortable. But, if somebody wants to make an interesting proposition, then yes we would seriously evaluate that.

As far as the Airline is concerned, it needs money and equity as well. But raising equity in the airline business, we would really like to see how the government and the regulatory framework changes. The request of the industry to make certain changes is well known and we are very pleased to see that the government has put Civil Aviation to its interest in the first 100-day agenda. So I think we should be just a little patient on that but yes that's also something that very much we would like to do.

Q: There is a significant amount of debt on KF's books as well. So, from what you indicated about the market sentiment right now, you would say it's probably a good time to go out and try deleveraging that balance sheet as well?

A: The UB Group has never hesitated to leverage when it was appropriate for strategic reasons. But our record is also of quick deleveraging. So we want to do the right way and whenever that opportunity strikes, we won't be far behind.

Q: How soon will the management are meeting to discuss the prospect of a QIP or any other fund raising mechanism?

A: We have met as often as required and it's not that we have a very formal and rigid process from that regard. So once this is done we will repay to the banks and then we will start looking at that.

Q: You have done Rs 900 crore today, you will probably do something like Rs 1,200 crore plus for the QIP as you have indicated, that's Rs 2,00 crore plus which means your debt then comes back to group debt to Rs 5,000 crore, what is sustainable and comfortable debt as you see it?

A: At that level, about Rs 4,000 crore is a substantial portion that is just for working capital because our industry is working capital intensive industry given the percentage of our supplies to state government and also the need to secure maturing spirits. So that's a comfortable level and I don't think that we would want to do anything more than another USD 300 million.

I would certainly see USL that we would be down to just sustainable levels of working capital and a little bit of other debt by the end of this financial year.

Q: All of 2009, we have been talking about the Diageo deal, do you think by this quarter there will be a good news for your stock holders?

A: The whole idea was that the strategic transaction, while it is absolutely necessary, should be done for achieving purely strategic reasons and that will not be achieved if we put artificial timelines to it.