Diageo ups shareholding in United Spirits for $27.3m

23rd August, 2019 by Nicola Carruthers

Johnnie Walker owner Diageo has increased its shareholding in Indian drinks group United Spirits to 55.2% following a US$27.3 million investment.

United Spirits’ portfolio includes Indian whiskies McDowell’s No. 1 and Royal Challenge

Diageo first acquired a controlling stake in Bangalore-based United Spirits Limited (USL) in 2014.

The UK-based firm has now purchased a further 3,310,515 shares (around 0.46% shareholding) in USL from the Bombay Stock Exchange. Diageo paid a per-share price of 591.95 Indian rupees (US$8.26) for the new shares.

According to Diageo, USL is a “highly strategic asset” that allows the company to “capitalise on opportunities within India, one of the most exciting growth markets in the world for total beverage alcohol”.

During Diageo’s fiscal 2019 results, USL’s organic net sales grew 8%, with growth from the ‘prestige and above’ segment up 12%, boosted by double-digit growth in Scotch.

The firm added that USL “continues to make significant progress on operating margin, which is now in the mid-teens, and is underpinned by a focus on everyday efficiency and investment in capabilities, technology and process improvement across the business.”

United Spirits produces the McDowell’s No. 1 brand, the second biggest-selling Indian whisky in the world. In 2018, McDowell’s No 1. grew 10% to 29m nine-litre cases, according to Brand Champions data.

Speaking to The Spirits Business earlier this year, John Kennedy, Diageo’s president of Europe, Turkey and India, said the country “has incredible potential because you’ve got a population that has a positive view of spirits, particularly whisky and Scotch whisky”.

The group has also “cycled through” various challenges that have hit India in recent years, including state-specific prohibition measures, demonetisation and the so-called ‘highway ban’ on liquor sales.

In May this year, the High Court in London ordered former United Spirits chairman Vijay Mallya to pay US$135m to Diageo.

The UK-based spirits producer is suing Mallya for a total of US$175m in a protracted legal battle.

Mallya agreed to resign for a US$75m payoff in 2016 following an internal investigation into the firm’s finances.

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