USL to sell-off non-core subsidiaries to reduce debt

India’s largest spirits maker United Spirits Limited (USL), on Friday said it plans to sell off non-core and non-profitable subsidiaries to recover its losses and reduce net debt.

As on March 2018, the company's net debt stood at Rs 3,265 crore.

Addressing shareholders at the 19th annual general meeting of United Spirits Limited, Chairman of the company Mahendra Kumar Sharma said the company has 10 non-operating subsidiaries out of a total of 18 subsidiaries. Of this, only 14 subsidiaries are making losses, while the remaining four make a nominal profits, which includes Royal Challengers Sports Private Ltd. Dring 2017-18, they reported a combined profit of Rs 90 crore.

It also has one associate company. The company is looking to sell off non-core subsidiaries so as to reduce its losses.

For the year ended March 2018, USL had a consolidated net loss of Rs 3,880 crore compared to Rs 4,524 crore in the previous year. “It will take at least a couple of years to reduce our losses. Until such time, the company cannot give any dividend to shareholders,” Sharma said.

For the year ended March 2018, USL reported a net revenue of Rs 8,170 crore. Its EBIDTA stood at Rs 1,021 crore.

Recently, the company came out with its maiden issue of non-convertible debentures amounting to Rs 750 crore to refinance existing higher cost debt of Rs 500 crore resulting in an increase in long-term debt. The company used profit from operations, proceeds from sale of non-crore assets amounting to Rs 1,056 crore. This reduction in debt together with renegotiation of borrowing rates and a favourable mix of debt reduced the total interest cost of Rs 108 crore during the financial year.

Replying to shareholders’ demand for payment of dividend, Sharma said “The Companies Act, 2013 prevents loss-making companies from giving any dividend to shareholders. We have been making profits for a couple of years now. But, we still have an accumulated loss on our books.”

The only way for the company is to accelerate growth and achieve profitability consistently so as to wipe out the loss completely, he added.

United Spirits produces and sells around 78 million cases of alcohol. It has over 100 brands of Scotch whisky, IMFL whisky, brandy, rum, vodka, gin and wine. It sells over 1 million cases annually covering 15 brands.