Business IdeasUnited Spirits to reduce debt by October-end
Vijay Mallya-controlled United Spirits Ltd (USL) has reiterated its plans to deleverage its balance sheet by the end of October this year. USL has a debt of around Rs 6,000 crore — a leverage of nearly 2.5 times.
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USL Chairman Vijay Mallya said today that the company was exploring options, including the sale of treasury stock and placements to institutional investors or private equity funds. The company is expected to raise around Rs 1,200 crore.
Mallya said: “I have made a commitment that we will deleverage within six months and the deadline ends in October. I will get it done by the end of October.”
USL raised around Rs 900 crore during July 2009 by offloading 10 per cent of the total of 17.2 per cent held through treasury stock, and used the entire proceeds to settle a part of the debt. If Mallya goes ahead and raises another Rs 1,200 crore by the end of October and uses the entire proceeds to settle the debt, it will be further reduced to Rs 4,800 crore.
The USL management had earlier stated that they would be comfortable with a debt of Rs 4,000 crore. Last month, the company had called off talks to sell a stake to Diageo — the world’s largest spirits group.
Kingfisher Airlines to raise funds by rights issue, GDRs Meanwhile, speaking about UB Group’s other business, Kingfisher Airlines, which is also bleeding and facing a heavy debt load, Chief Financial Officer Ravi Nedungadi said the company plans to raise funds by a rights issue and issue of global depository receipts (GDRs) in the current financial year for Kingfisher Airlines.
The funds would be used to reduce debts and meet working capital requirements and operational needs, Nedungadi said. He did not specify the size and pricing of the issue.
Regarding UB, Nedungadi said the company was looking at a capital expenditure of Rs 1,000 crore during the next financial year. The money will be spent towards augmentation of its installed capacity at several places.
The company is also in the process of reducing its dependency on molasses-based alcohol as the prices of the commodity have hit the roof in the recent months at around Rs 6,500-7,000 per tonne. The company aims to go in for more of grain-based alcohol, Nedungadi added.