After putting off its results three times, United Spirits finally came out with its fourth quarter earnings for 2013-14 on Thursday, reporting a huge loss of ₹5,380.10 crore because of writedowns related to the sale of its Scottish subsidiary, Whyte & Mackay.
UK-based Diageo, which owns nearly 55 per cent of United Spirits, is in the process of cleaning up the Indian company’s balance sheet and had to postpone the declaration of results after the audit committee pointed out that the management was unable to explain the why an unsecured loan worth ₹1,450 crore was extended to UB Holdings.
The company said it had made a provision (or writedowns) of a total of ₹4,321.63 crore, which includes provision of ₹350 crore in lieu of the loan provided to UB Holdings as well as ₹600 crore which other entities owe USL.
The management has also made a provision of ₹3,614.24 crore for Whyte & Mackay, which the board said was because the net proceeds of the stake sale were insufficient to fully repay the intra-USL group loan.
Consequent to the results, the liquor giant has directed a detailed inquiry into receivables of ₹650 crore from various debtors who gave loans to “certain alleged UB Group entities”. The board has asked the managing director to engage independent advisers, and specialists if necessary, for the inquiry and to take action to recover the dues. The company’s net sales increased three per cent to ₹1,916.95 crore for the quarter while other operating income was at ₹26.39 crore, compared with ₹5.24 crore during the same period in the previous year. Other income during the quarter was negative at ₹37.75 crore, compared to income of ₹68.53 crore for the same period last year.
Loans and advancesFor the entire fiscal, the net loss was ₹5,102.82 crore compared with a net profit of ₹320.80 crore in 2012-13. Total income grew two per cent to ₹8,516.60 crore. The company did not declare any dividend for the fiscal because of losses it incurred during the year. The board also mentioned a claim made by an entity alleging that it had given a loan amounting to ₹200 crore to Kingfisher Airlines at an interest rate of 15 per cent on the basis of agreements executed in December 2011 and January 2012. But after investigations and legal advice, the management does not expect any liability or obligation to arise on the company out of this claim.
In another instance, some of the debtors who owed money to United Spirits claimed that the company owed them money in return. They refused to pay until their dues were cleared. However, the management said it does not believe that these entities are entitled to withhold payment.
Following the disappointing results, USL shares fell nearly nine per cent to ₹2,390.25 at the close of day’s trade.