The country's largest liquor maker, United Spirits on Saturday said it has acquired a 41.5 per cent stake in Sovereign Distilleries (SDL), a producer of extra neutral alcohol (ENA).
This investment will help United Spirits to move towards one-third of total self-sufficiency of its projected ENA requirements, a press statement from the company said.
The statement said USL paid Rs 3.5 crore to buy 41.5 per cent of the outstanding shares of the Karnataka-based SDL.
According to the agreement, USL has taken a 20-year exclusive lease on SDL's 180 kilo litre of alcohol per day (KLPD) for which a further sum of Rs 42 crore has been paid as deposit.
“United Spirits is poised to take the next quantum leap with volumes targeted at 200 million cases in the next five years. Increasing self reliance in ENA, which is a core raw material for our business, is our highest priority. We are targeting 50 per cent self-reliance in ENA by 2013,” Mr Vijay Mallya, Chairman, United Breweries, said.
This move comes close to the acquisition of Tern Distilleries and Pioneer Distilleries which gives about 35 per cent control of spirit requirements.
All the recent acquisitions are capable of processing multi-substrate feedstock, and therefore are an important hedge against cyclical input price movements.
Additionally, these moves will also enable USL to capture the distillation margin and thereby reduce the overall landed cost of raw material.
The statement said USL has outlined an investment strategy to step up its supply side security last year with a capex of Rs 1,100 crore including acquisitions and infrastructure upgradation at its own units. “United Spirits' volumes have grown by 12 per cent in FY 2011.This strategic investment augurs extremely well for our expansion plans as well as for our continued endeavours to improve margins,” USL's President and Managing Director, Mr V.K. Rekhi, said.