Diageo-controlled United Spirits Ltd (USL) is seeking nod from its shareholders through a special resolution to provide corporate guarantee to a Rs 100-crore loan that its subsidiary Pioneer Distillers is availing from Standard Chartered Bank.
In a BSE filing, the company said its Board of Directors had on November 2, approved a decision of "providing corporate guarantee" for the financial assistance of Rs 100 crore that Pioneer Distilleries is seeking from the bank to be used for funding capacity expansion and for other capital needs.
The loan would augment the production capacity of Pioneer Distillers Ltd (PDL), which would in turn secure supply of ENA (extra neutral alcohol) and IMFL to UK-based Diageo Plc firm.
"This in turn will ensure security of supply of ENA and IMFL to USL," USL said to its shareholder. USL holds 75 percent shares of Hyderabad-based PDL .
USL said PDL has unique synergy with it as the latter has the infrastructure and capability to produce finest quality of ENA, which is used for the production of alcoholic beverages such as vodka, gin, whiskey, cane, etc by the Diageo group firm.
"USL has robust growth trend and require additional quantity of ENA every year. USL and its associates units are buying entire ENA produced in PDL," USL said.
Moreover, PDL is producing USL brands at its bottling facility and selling it to USL in accordance with an arrangement.
The voting of share holders will close by January 7, 2016.
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