Home >Companies >Company-results >United Spirits posts loss of Rs27.83 crore even as revenue grows 8.3%

Bengaluru: India’s biggest liquor company United Spirits Ltd (USL) said revenue in the September quarter grew 8.3% to 2,178.58 crore, helped by strong demand for its McDowell’s No.1 and Royal Challenge whisky brands.

However, despite reporting 5.8% growth in sales volumes, its fastest in more than two years, USL swung to a loss of 27.83 crore in the quarter ended 30 September, from a profit of 94.27 crore in the same quarter last year, primarily due to one-time charges.

USL, now controlled by Diageo Plc., is investigating its accounting practices and has been forced to set aside provisions to cover for potentially failing to recover money from debtors.

Over the past two-and-a-half years, liquor companies have struggled with weak sales growth because of rising taxes and slowing economic growth. Volume growth for the industry fell to its lowest in more than a decade, even as costs of extra neutral alcohol, a key ingredient, pulled down margins at liquor companies.

USL has been losing market share to rivals Pernod Ricard and Allied Blenders and Distillers Pvt. Ltd over the past two years.

However, in the September quarter, sales volume growth finally recovered because of an improvement in consumer sentiment.

Earlier this year, USL was late in reporting its first-quarter earnings as the company failed thrice to get its results for the January-March quarter cleared either by its board or by its independent auditors BSR and Co.

On 4 September, the company finally published its results for the March quarter, reporting its biggest-ever loss of 5,380.1 crore for the quarter. The loss was primarily because of a write-down of 4,321.6 crore that the firm recorded as the proceeds from the sale of its Whyte and Mackay unit were insufficient to repay a loan it had taken to buy the UK-based whisky business.

USL also said then that it was conducting a “detailed and expeditious inquiry" that, among other things, will look at the inter-company loans between USL and UB Group entities that were used to prop up the now defunct Kingfisher Airlines Ltd and whether its executives had violated rules by approving those loans.

The inquiry will also cover some agreements allegedly entered into by USL with a Kingfisher creditor and certain claims made by USL debtors, some of whom are now refusing to repay the company.

The inquiry may have an impact on its financial statements, USL’s independent auditor BSR and Co. warned in its report on the company’s first-quarter results. BSR had published similar remarks in its reports on the quarter ended 30 September.

BSR said it couldn’t comment on the accuracy of USL’s accounting, partly because of the pending inquiry referred to above. BSR also brought up the possibility of fraud and said it would only be able to pass judgement on this once the inquiry is complete.

USL shares rose 0.81% on Friday in Mumbai trading to close at 2720.30 apiece, while the benchmark Sensex rose 0.38% to 28,046.66 points.

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