United Spirits comfortable with Rs 4000 cr debt

United Spirits (USL) has raised Rs 1,100 crore by selling treasury stock in two block deals. CNBC-TV18 reports that in the first block deal, 52.6 lakh shares or 5.2% of the company's equity changed hands on the BSE at Rs 900 per share. In the second block deal, 72 lakh shares changed hands on the NSE at Rs 886.30 per share. The management, however, said that it was comfortable with a debt of Rs 4,000 crore.

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

Here is a verbatim transcript of Varinder Bansal's comments on CNBC-TV18. Also watch the accompanying video.

This is the first step in deleveraging the balance sheet and in January, Vijay Mallya had gone on record saying that in the next six months, he would deleverage the balance sheet. The total consolidated debt on the books is nearly Rs 7,500 crore. Rs 1,100 crore has come today and what we are expecting is another qualified institutional placement (QIP), which will come soon. It will be anywhere between USD 250-300 million, which is confirmed by the management. So, you could expect other Rs 1,500-2,000 crore coming from the QIP issue.

In total, if you add up today's treasury share stake sale of nearly Rs 1,100 crore and another Rs 1,500 crore coming from the QIP, means the total consolidated debt could go down from Rs 7,500 crore to nearly Rs 5,000 crore. The management today has gone on record saying that they are comfortable with the debt of nearly Rs 4,000 crore. So, this will surely bring down the debt equity or the burden, which was lying on the head of United Spirits.

It is also important to understand that there are various other options, which are still with the management. One thing is the part stake sale in Whyte and Mackay. The management has also said that 49% stake sale in Whyte and Mackay is one important part of deleveraging the balance sheet. If they have to go ahead with divestment of 49% in the future, then we could possibly see another Rs 1,500-2,000 crore coming from that side. Also, Kingfisher stake sale has been talked in the market a lot but that depends on the government regulations coming in.

Thus, after the treasury share stake sale, after the QIP, the debt will come down from Rs 7,500 crore to nearly Rs 5,000 crore and still you have option of Whyte and Mackay as well as Kingfisher. The management today told CNBC-TV18 that the maximum amount of what they consider to raise from this point of time will be around USD 300 million and that will be it.

If you see the repayment schedule, in FY10, the total payment which has to be made by United Spirits will be Rs 1,100 crore and in the next year, it will be nearly Rs 2,500 crore. Therefore, after this step, which the management has taken today, it seems that the balance sheet is getting repaired for the moment. However, other steps, which will be followed by the company will be important to watch out for, specially the QIP and if there is any stake sale in Whyte and Mackay and Kingfisher Airlines.

Kingfisher Airlines' burn rate

The company is not finding buyers for Kingfisher because of the obvious reasons. There are all type of numbers going around in the market, but the government issue, which is the important one, is hanging in between. Mallya had clearly told that there are private equity guys who have interest in the company, but the pricing is the foremost issue because of all the issues as you have mentioned and there is no interest coming at the moment. All the players who want to invest into this industry want these issues to be cleared before they put in their money into this company.