Bangalore: Vijay Mallya’s United Spirits Ltd, India’s largest distiller, reported a 71% jump in net profit to Rs.80.6 crore for the December quarter, helped by cost control and strong volume growth.
Total income for the quarter ended 31 December rose 12% from a year ago to Rs.2,202.7 crore. Volumes rose 7% to 32.6 million cases in the quarter, higher than some analysts’ estimate of a 5% increase.
“The sales are below what most people were expecting… I think the price realization might be lower because volume growth was good,” said V. Srinivasan, analyst at Angel Broking Ltd.
United Spirits saw strong demand for its higher-priced brands with volumes of McDowell’s No.1 whisky increasing 23% and those of Black Dog jumping 29%.
The Bangalore-based company kept its advertising expenses under check in the quarter with promotion costs rising just 2.7% to Rs.222.5 crore. Input costs rose 10% but the company said the cost of extra neutral alcohol, a key ingredient, is likely to fall sequentially, starting from the end of the current quarter.
In November, Mallya struck a deal valued at $2.1 billion, including the cost of purchasing shares held by the public, to sell 53.4% in United Spirits to the world’s largest distiller Diageo Plc. The UK firm was to acquire 19.3% from the group’s holding company. However, Indian regulators have asked for more details from the companies about the deal structure as well as competitive issues.
The “applications are in due process with the authorities and we hope to receive their approvals in due course”, United Spirits said on Monday evening.
United Spirits, which competes with companies such as Pernod Ricard and Allied Blenders and Distillers Pvt. Ltd, is expected to use a portion of the money it receives from Diageo to reduce its debt of over Rs.8,000 crore. In the latest quarter, interest expense was Rs.163.6 crore—more than double its net profit.
The company said it continued to be hurt by regulatory changes in Tamil Nadu, where, according to United Spirits, the state government is promoting local brands by artificially controlling supply. The retailing of liquor in that state is run by the local government.
“Against a capacity of 1 million cases per month (in Tamil Nadu) and a demand that is much larger, United Spirits’ monthly capacity is being artificially pegged at 0.75 million cases with an additional compulsion to supply medium/cheap brands to the extent of 40% of such truncated capacity...to benefit new and existing local players,” United Spirits said in a statement.
Shares of United Spirits, which reported results after market hours, fell 0.53% to Rs.1,855.75 each on BSE on Monday, while the Sensex ended 0.15% lower at 19,751.19 points.