The Hindu Business Line : UB finds Cobra Beer ‘over-valued’

UK market
Mr Mallya said he was more interested in the UK business of Cobra Beer, because it will give his company a deeper access to over thousands of restaurants in Britain that sell Indian food.

K. Giriprakash

Bangalore, Jan. 13 The £200 million valuation of the UK-based Cobra Beer, which is up for sale, may deter suitors like United Breweries from making a strong bid for the company.

Sources in United Breweries told Business Line that the company believes Cobra Beer is “over-valued”. UB Group’s Chairman, Mr Vijay Mallya, recently said he was willing to bid for the company’s UK business.

But sources in the company say that even if the company makes a formal bid, any further steps would be based on whether Cobra Beer agrees to bring down the valuation.

Sources pointed out that in spite of such a “high” valuation Cobra Beer is yet to post any profits, though it is considered one of the fastest growing beer brands in the UK. Cobra Beer had earlier tried to sell its company to Diageo, the world’s largest liquor maker, but after failure of talks, it decided to strengthen and expand its business and raised £15 million a few months ago for this purpose.

Cobra Beer’s promoter, Lord Karan Bilimoria, who founded the company 18 years ago, has appointed NM Rothschild & Sons to look for a buyer. After putting the company for sale, Lord Bilimoria recently announced that he plans to sell the company’s UK and Asia businesses separately.

Mr Mallya said he was more interested in the UK business of Cobra Beer, because it will give his company a deeper access to over thousands of restaurants in Britain that sell Indian food.

Cobra’s plans

A spokesperson for Cobra Beer had told Business Line early last year that it plans to get the company listed on Indian bourses, after a listing in the UK. But these plans have not materialised yet. The beer maker also wanted to set up a greenfield brewery in India.

Cobra Beer has a 76 per cent stake in Iceberg brewery in Bihar and has bottling arrangements with eight breweries across the country. Cobra Beer sells three brands in India, which include King Cobra, Cobra Beer and strong beer Iceberg. It has a turnover of over Rs 100 crore in its Indian market.

The per capita consumption of beer in India is slightly over 1 litre, compared with about 23 litres in China.