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Mar 11, 2013, 01.19 PM IST | Source: Moneycontrol.com

United Spirits: Why are investors in high spirits?

United Spirits shares have moved up around 6 percent to Rs 1920 in the past one week in an otherwise slow market, after lenders to Kingfisher Airlines indicated they may sell group company, United Spirits (USL) shares pledged with them

Moneycontrol Bureau

United Spirits shares have moved up around 6 percent to Rs 1920 in the past one week in an otherwise slow market, after lenders to Kingfisher Airlines indicated they may sell group company, United Spirits (USL) shares pledged with them

It is common for lenders to take shares of group companies as collateral. When the loan becomes bad, they have the option of selling shares in the market to recover loans. In this case, bankers have lent over Rs 7,500 crore to KFA against securities and collaterals pledged by Chairman Vijay Mallya. Did you read: Regulatory approvals in place for Diageo-USL deal: Mallya

Meanwhile, USL sold 53.4 percent stake to UK-based Diageo for USD 2.1 billion and now that SEBI has given the company nod to buy another 24 percent stake from non-promoters, bankers are keen to offload their share in a bid to recover part dues. Experts say that that though bankers are keen to liquidate pledged assets, it will be a tedious and time-consuming affair as it involves complicated legal procedures.

Around 98 percent of the 27.5 percent promoter holdings of USL is pledged with bankers who are keen to either sell it off to UK-based Diageo or give it back to USL at current market rates

Should investors cheer this news?

 There is certainly a positive sentiment running among shareholders after Diageo took over USL late last year. "Even bankers who have USL shares as underlying security against KFA loans have been looking at the Diageo deal for quite sometime now. They will earn definitely earn  premium by selling pledged shares in an open market," said Sanjeev Jain from Microsec Capital. He further said, once the open offer process is completed, USL which has around Rs 8,000 croe debt may become debt free.

A technical analyst with a Chennai-based firm says, "United Spirits is currently trading at-least 30 percent higher than what Diageo paid per share at the time of taking of majority stake in USL late last year. I have my doubts whether lenders would want to give away shares at Rs 1440 to Diageo. Lenders will definitely sell shares in an open market at current market rates."

In a recent interview to CNBC-TV18, Srei Infra's vice-chairman, Sunil Knaoria had indicated that it hopes to earn at least 15-17 percent premium by selling off USL shares it holds as underlying security on the Rs 430 crore KFA loan it bought from ICICI Bank last year.

 

 

 


 

United Spirits stock price

On November 28, 2014, United Spirits closed at Rs 2732.90, up Rs 60.65, or 2.27 percent. The 52-week high of the share was Rs 2940.55 and the 52-week low was Rs 2226.00.


The latest book value of the company is Rs 262.47 per share. At current value, the price-to-book value of the company was 10.41.

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