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Diageo quiet over United Spirits delisting rumour

Johnnie Walker owner Diageo said it would not comment on reports that suggest it is planning to delist its Indian arm, United Spirits.

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

On Monday (18 May), Indian news site CNBC TV 18 reported Smirnoff owner Diageo is exploring the option of buying out minority stakeholders and delisting United Spirits, according to unnamed sources.

Diageo has reportedly begun discussions with investment bankers and consultants over advice on a delisting offer.

When asked about the claim, a Diageo spokesperson said: “As a policy we do not comment on market rumour and speculation.”

The alleged move comes just two months after Diageo increased its shareholding in United Spirits to 55.9% as part of the firm’s long-term premiumisation strategy in India.

Diageo first acquired a controlling stake in Bangalore-based United Spirits Limited (USL) in 2014. The firm has gradually increased its stake in the Indian group over the last few years.

Earlier this month, United Spirits resumed operations at the majority of its manufacturing facilities in India after the group’s sites were temporarily closed due to the country’s coronavirus lockdown. The plants are now operating at reduced capacity.

Diageo said that India “remains one of the most exciting growth markets in the world” for alcoholic beverages.

During the final six months of 2019, Diageo’s net sales in India increased 2%, “primarily impacted by a broad-based consumption slowdown, and partly hampered by both a temporary supply chain disruption in the first quarter as well as liquidity challenges in certain key markets for Scotch”.

Diageo’s ‘prestige-and-above’ segment in the market rose by 5%, driven by blended Scotch whiskies Johnnie Walker and Black & White. The growth was led by a “solid performance” from Indian whisky McDowell’s No.1, which was “enhanced by the continued success” of its Platinum range. Net sales of ‘popular brands’ fell by 4%.

Last month, Diageo withdrew its guidance on net sales and operating profit for fiscal 2020 due to “uncertainty” over how the pandemic would hit the group.

Diageo’s next phase of its three-year share buyback programme of up to £4.5 billion (US$5.5bn) will not commence during the remainder of fiscal 2020. Under the first phase of the scheme, which ended on 31 January 2020, the group returned £1.25bn (US$1.5bn) to shareholders.

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