United Breweries Ltd (UBL), which was hit with a Rs 752 crore penalty imposed by the Competition Commission of India (CCI) on September 24 over cartelisation may have to raise debt to pay off the penalty amount.
According to the brokerage firm Motilal Oswal, UBL may have cash and cash equivalents according to the current forecasts of the brokerage company but may have to raise debt.
“UBBL had cash and cash equivalents of INR4.7b (net cash of INR3.54b) at the end of FY21. As per our current forecasts, it may have the net cash to pay the penalty of INR7.52b by end of FY22 (assuming that is the timeline) or else it may have to raise debt,” it said in an investor report adding that it maintains the Sell rating on UBL’s stock.
“As we have highlighted in recent years, an adverse CCI decision is a key investment risk,” the report added.
The antitrust body on September 24 has imposed penalties of around Rs 900 crore on three beer-making companies including SABMiller India (makers of foster beer), United Breweries (makers of Kingfisher beer) and Carlsberg as well as their trade association All India Brewers’ Association (AIBA) for cartelisation.
These three players have a share of 88 percent of the Beer market, with UBL being the market leader with over 50 percent market share.
While the CCI has directed United Breweries and Carlsberg India to pay penalties of Rs 750 crore and Rs 120 crore respectively, it has given SABMiller India a 100 percent reduction in penalty for cooperating in the investigation.
SABMiller India is now known as Anheuser Busch InBev India.