The Hindu Business Line : United Spirits pre-pays $200 m

According to a top official of the company, for the full year (2006-07), interest costs are expected to go down Rs 75 crore because of the pre-payment of part of the loan. The pre-payment of the loan was possible because of high growth in the spirits' business in which it has over 70 per cent market share.

The official said during the first six months of the current financial year, the company had paid an interest of around Rs 52 crore.

He said it also had a total debt of around $300 million. Out of this amount, $100 million was raised through FCCB, another $100 million was the working capital debt and the rest was the debt taken for acquisition of Shaw Wallace.

He said FCCB normally have a tenure of between five years and seven years. It would be converted into equity and hence the company does not have to pay an interest on that post-conversion. "Even otherwise the bond carries a mere 6 per cent interest," he said.

At an analyst meet earlier, the company had said that interest costs were high on account of borrowings to fund Shaw Wallace acquisition. However, following the repayment of the loan, there would be a reduction in interest cost during the current fiscal year.

Manufacturing front

On the manufacturing front, the company is firming up plans to consolidate its operations leading to cost savings. The focus will primarily be on profitable sales. One of the measures it is looking at is to have not more than one or two distillery per State.

This will lead to significant cost advantages though the distilleries will have to be more scalable as well as flexible.

There are also plans to launch existing products in packaging variants like tetra packs and sachets which could lead to cost reduction in packagings and also the number of price points. The company is also looking at acquiring distilleries abroad as part of its expansion plan.

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