India: Heineken may need to wait Mallya case settlement before acquiring additional stake in United Breweries

Global beer maker Heineken, which owns 44 per cent stake in United Breweries, may have to wait till the case involving Vijay Mallya is settled to acquire an additional stake in the Indian company, The Hindu BusinessLine reported on September 11.

The Enforcement Directorate has in its custody about 4 crore shares constituting 15.2 per cent and Heineken is learnt to have already approached the government agency to release those shares to the company so that it can increase its stake in United Breweries. Vijay Mallya owns 7.79 crore shares constituting 29.46 per cent stake in the company, with 3.52 crore shares pledged with lenders.

Sources in the company told BusinessLine that once the Dutch company gets over 51 per cent stake, it is likely to make several changes to the management structure. Once the current managing director’s tenure ends in another couple of years, it is likely to post a general manager to run the company’s operations in India. Most of the subsidiaries of Heineken across the globe have general managers heading the domestic operations.

It is understood that the Enforcement Directorate will need a formal mandate to either offload the shares to Heineken or sell in the open market.

During FY2017-18, United Breweries added about 1.5 per cent market share over the previous year as its volumes grew by 10 per cent. This was the first double-digit volume growth since FY2010-11. UBL’s sales volume improved in key profitable markets, with strong market share gains in most large States across the country. The beer industry is expected to grow by 7.6 per cent CAGR in terms of volume over FY18-24.

Motilal Oswal research in a note to investors said the company is preparing its own craft-beer offering to capture growth in this segment. While the beer market continues to expand, the company is looking at larger beverage consumption occasions to further drive the growth of the business.

UBL has also been working on launching a portfolio of non-alcoholic beers (known globally as Radlers). These new offerings should enable UBL to expand its market further. These will be produced at a brewery in Bihar and are scheduled to be test-marketed, starting the third quarter of the current fiscal.

A separate vertical has been created to drive this business.

For the first quarter of this fiscal, UB reported a 37 per cent increase in its standalone net profit to ₹221.92 crore for the quarter ended June 30, because of double-digit volume growth. Its total income during the quarter stood at ₹4,173.18 crore, up 9.24 per cent.

The beer maker’s shares closed 3.69 per cent lower to end the day at ₹1,289.

11 September, 2018