Diageo-controlled United Spirits to sell 32 popular brands to Inbrew for Rs 820 crore

Diageo-controlled liquor maker United Spirits Ltd (USL) on Friday said it has approved the sale and franchising of selected brands to Singapore headquartered Inbrew Beverages for a total cash consideration of Rs 820 crore.

However, the transaction does not include the McDowell's or Director's Special brands, which will be retained by USL.

"USL and Inbrew have executed definitive agreements for the sale of the entire business undertaking associated with 32 brands, including iconic brands Haywards, Old Tavern, White-Mischief, Honey Bee, Green Label and Romanov, for a total cash consideration of approximately Rs 8,200 million, subject to customary adjustments," the company said in a BSE filing.

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The sale portfolio covers the entire business undertaking associated with the 32 brands set out below, including the related contracts, permits, intellectual property rights, associated employees, and a manufacturing facility.

In addition to the above, USL and Inbrew have entered into a 5- year franchise arrangement for 11 other brands, including Bagpiper. USL has also granted Inbrew a right, subject to certain conditions, to convert the fixed term franchise arrangement into one with perpetual rights to use and/or a call option to acquire the brands at a pre-agreed consideration.

"Certain ancillary agreements, including transitional services arrangements, in relation to the sale of the business undertaking and the franchise and option agreements have been approved to be executed between USL and Inbrew," it said.

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Hina Nagarajan, managing director and CEO of USL, said, "The transaction reflects the continued evolution of the management of the Popular portfolio since 2016, when the company moved to a franchise model in many states, to enable a sharpened focus on 'Prestige & Above'. This is a significant move to reshape our portfolio in service of our publicly stated mission to deliver sustained double-digit profitable top-line growth."

Last year, USL had a strategic review of selected Popular brands. "On 23 February 2021, we initiated a strategic review of Selected Popular brands. This strategic review is ongoing and is considering all options to deliver sustainable long-term profitable growth. The review is expected to be completed by March 31, 2022," said USL in a regulatory filing on March 16.

Ravi Deol, chairman of Inbrew, said, "The acquisition of these iconic brands provides Inbrew with a unique platform to extend its ambition of becoming India’s trusted household beverage company.

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These brands have delighted consumers over generations, and we are excited at the prospect of strengthening this legacy. Inbrew will revitalise these brands through expanded distribution, innovation and investments. After the acquisition of Molson Coors’ beer business last year, we will now participate in the mainstream spirits category, making Inbrew India’s diverse AlcoBev player."

The company expects to complete the transaction by the end of the quarter ending September 30, 2022.

USL today reported a 12.14 percent decline in consolidated net profit at Rs 178.6 crore for the fourth quarter ended March as margins were impacted by rising inflation. The company had posted a net profit of Rs 203.3 crore in the year-ago period, according to a regulatory filing.

However, its revenue from operations was up 1.16 percent at Rs 7,767.3 crore during the quarter under review. In the same period a year ago, it stood at Rs 7,678.1 crore.

"Gross margin was 41.7 percent, down 220 bps (basis points), impacted by rising inflation partly offset by favourable product mix and productivity savings," USL said in an earning statement.