United Breweries earmarks₹300-cr investments this fiscal

Beer maker United Breweries has earmarked over ₹300 crore for investments this fiscal and is expected to see consolidation of its operations.

With Heineken buying United Spirits’ 3.21 per cent stake in United Breweries for ₹872 crore and increasing its total stake to 42 per cent, the Dutch company is expected to streamline the company’s operations further.

Sources said that though Heineken had overtaken UB Group in terms of stake in the company sometime ago, United Breweries does not see any reason to make any large scale changes either in the board or replace key officials in the immediate future. Nor does it plan to replace Vijay Mallya as chairman of the board as it does not see any conflict arising out of the recent increase in Heineken’s stake in United Breweries.

“We have had no issues with the previous owners and would rather want them to be around for sometime,” an official with United Breweries said.

However, Mallya, who built the iconic Kingfisher brand from the scratch, will now have to see it being managed by his foreign partner.

In an earnings call this month, top UB officials told analysts that working capital requirements could increase over the next two years. During the previous year, United Breweries saw a decrease in working capital because of the stagnant market as well as the level of trade receivables being stable.

“We have been able to maintain the working capital (during the current year) by decreasing and by keeping the level of trade receivables more or less stable… and secondly by also achieving a better level or lower levels for other receivables,” UB’s top officials pointed out.

They also said that the distribution cost has increased largely because of increase in freight charges due to bottlenecks in supply.

Therefore, the company plans to have a dedicated transport which can be pre-booked for an entire year on an exclusive basis.

The company is also working on limiting the pre-payment demand made by certain state run monopolies and expects to have a cash surplus of around ₹400 crore by the end of the year. I

ts consolidated debt stands at around ₹845 crore. United Breweries has a total of 21 bottling units and 10 are on contract.