Shares of United Breweries Ltd, the manufacturer of Kingfisher beer, dropped over 7 percent on Wednesday, January 7, after the company announced the immediate suspension of beer supplies to Telangana Beverages Corporation Ltd (TGBCL).
TGBCL, a public sector entity, holds a monopoly on the wholesale and retail sale of alcohol in Telangana, managing the distribution of Indian Made Foreign Liquor (IMFL) and beer. United Breweries cited financial concerns as the reason behind its decision. The company stated that TGBCL has not revised the basic price of its beer since the 2019-20 fiscal year, leading to significant losses. Additionally, TGBCL has accrued substantial unpaid dues for past supplies.
"This decision of the company has arisen because TGBCL has not revised the basic price of the company’s beer since 2019-20, resulting in huge losses in the State and significant overdues remaining unpaid by TGBCL for the past supply of beer by the company," the beer maker said in a statement.
In a statement, United Breweries emphasized that the pending payments and pricing issues rendered continued beer supply to TGBCL "unviable."
Following the announcement, United Breweries' stock fell as much as 7.4 percent, reaching an intraday low of ₹1,920. The stock is currently trading approximately 13 percent below its 52-week high of ₹2,202.90, recorded in September 2024. Despite the recent dip, the stock has gained 16.6 percent from its 52-week low of ₹1,645.80, achieved in February 2024.
In the past year, the stock has risen over 11 percent. However, it has declined more than 2 percent in January 2025, reversing gains made in the preceding two months.
In the second quarter of FY25 (July-September), United Breweries reported a 23 percent year-over-year increase in net profit, reaching ₹132 crore. EBITDA grew by 21 percent to ₹237 crore, while net sales rose 12 percent to ₹2,115 crore. The company is expected to release its October-December quarter results soon.
The suspension of beer supplies in Telangana marks a significant challenge for United Breweries, potentially impacting its market share in the state. While the company’s financial performance remains strong, the resolution of pricing and payment disputes with TGBCL will be crucial for sustaining its growth momentum. Investors will also keep a close eye on the company’s upcoming quarterly results for further clarity.
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