Kingfisher loan may not affect United Spirits: Religare

Offering no more relief to the troubled Kingfisher Airlines, a consortium of banks led by State Bank of India on Wednesday decided to recall their loans. The banks are now likely to realise the collaterals and the consortium has shares of United Spirits valued at Rs 6,500 crore. 

But, Varun Lochab of Religare Capital Markets believes United Spirits (UNSP) does not have any direct exposure to Kingfisher Airlines and United Breweries Holdings Limited (UBHL) may have acted as a corporate guarantee. He also added that though, the total value of the collaterals may be to the tune of Rs 6500 crore, the value of shares pledged are certainly lower.
Lochab also said, "We maintain our buy rating on United Spirits with a target price of Rs 2,500. From the financials point of view, we don't see a material impact." Here is the edited transcript of the interview on CNBC-TV18. Q: What is the exposure of United Spirits to Kingfisher Airlines bankers in terms of shares given as collateral or corporate guarantee is given?
A: United Spirits does not have any direct exposure to Kingfisher Airlines. If one looks at the balance sheet, they have not given loans to Kingfisher. They have got some small exposure to United Breweries Holdings Limited (UBHL) in the form of guarantee which is there.
If one looks at the last annual report, there are some corporate guarantees to the tune of around Rs 50 crore. That is the exposure and similarly in terms of loans which are due from UBHL, which was given by United Spirits (UNSP), is a small number. Q: How small is this?
A: It is close to Rs 100 crore odd. Q: If you can tell us what is their exact exposure to Kingfisher Airlines bankers?
A: United Breweries does not have any exposure to Kingfisher Airlines. Q: Can you quantify how many shares are pledged at all? How much of United Breweries Holdings stock is exposed in terms of pledges and corporate guarantees?
A: We do not cover UBHL. I won’t be able to comment on their specifics. In case of UBHL, the extent of pledging in terms of percentage is not very high and the market cap of that entity is very small. The pledges are not worth a lot at this point of time.
In case of UBHL the key would be the corporate guarantees. We do not have the number with us as we do not cover it. But, UBHL would have guaranteed most of the Kingfisher loan. Therefore, there will be a big number from the corporate guarantee perspective on UBHL. Q: Can you quantify how many of the shares pledged can be realised for the banks? How much do the shares realise and can the shares bring them as much as Rs 6,000 crore?
A: The shares won’t be accounting for that much because if one looks at the shares pledged, in case of UNSP it is only 2.3 million shares. That will be around Rs 500 crore. None of the other entities have even a market cap anywhere close to the number that you are talking about.
Our sense is, the value of collateral that they are talking about is Rs 6,500 crore and it includes all forms of collateral, whether it is rights on certain properties, if it includes corporate guarantees and it includes some pledged shares. So, the sum total could be to that extent but, value of shares pledged as collateral will be much lower than that. Q: What is your call on United Spirits stock itself? After their results you had a resounding buy on it but after this entire fiasco would you rethink that?
A: We maintain our buy rating on United Spirits with a target price of Rs 2,500. From the financials point of view, we don't see a material impact.