UB to to raise brewing capacity by 20 per cent; Shaw Wallace integration underway

The UB Group has announced plans to invest Rs1,000 crore in the next three years to raise its brewing capacity by 20 per cent from its current 60.25 lakh hecto litres to 71.50 lakh hecto litres per annum, as part of a capacity expansion programme, which commenced in April 2006.

For the current financial year the Vijay Mallya-led group has a capital expenditure plan of Rs488 crore.

According to UB Group chief financial officer Ravi Nedungadi. the expansion would be funded by the recently concluded rights issue of Rs425 crore and the remaining through combination of internal accruals and debts.

UB is setting up a facility in Andhra Pradesh. This will have an annual production capacity of 60 lakh cases per annum to begin with and 120 lakh cases eventually. The company also plans to have a greenfield plant in Karnataka with a capacity of 30 lakh cases a year.

Nedungadi told CNBC-TV18 in an interview that the company was positive about the acquisition of the Shaw Wallace package. The consolidation of the package will depend on the time when UB Group is able to understand the actual structure of the Shaw Wallace group and resolve all issues there, he says.

"We have borrowed Rs 1545 crore for the total acquisition of the Shaw Wallace package. Yesterday, we have used part of the sales proceeds, to pay a part of the debt, and reduce it. Right now it comes to over Rs 1000 crore."

On the debt-equity ratio, he said, "We can talk about the combined debt equity position, only when we have got all the swap ratios and the equity valuations in. We know that the work is going on. But we had obviously reckoned that, cash would come in from the sale of non spirited assets. In order to opt for that loan, we took it. And this is very much according to the plan," he told the business channel.

Nedungadi also disclosed that the process of management integration and the integration of the market phases has already started. "The work has started very closely between UB companies, Shaw Wallace sales people and the procurement people. So we can expect that synergy to flow straight away. In terms of the legal merger of companies, Shaw Wallace structure was fairly a complex structure. We had to simplify and reduce it as much as possible. We have mandated professional advisors to come up with the exact road map for the merger and we expect them to announce it within next 45 days."