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Shares of Vijay Mallya-promoted United Spirits plunged on the bourses on Monday after Mallya said he was under no compulsion to do a deal with London-listed Diageo. The United Spirits stock closed at Rs 1,095.05, down 9.15 per cent on the Bombay Stock Exchange on Monday, having plunged about 17 per cent in intra-day trade.
The shares had been hitting the higher circuit on speculation that global liquor company Diageo would buy a stake in United Spirits. On October 23, the United Spirits scrip touched a 52-week high at Rs 1,424.30. Meanwhile, the Diageo stock is trading marginally lower at the London Stock Exchange.
However, market expectations crashed when Mallya said on Saturday that he was not sure if he would sell stake in United Spirits. Mallya was quoted on Saturday saying that the stake-sale was uncertain.
On September 25, Diageo plc and United Spirits issued a joint statement on the bourses. It said: “Diageo plc is in discussion with United Spirits Ltd and United Breweries (Holdings) Ltd in respect of possible transactions for Diageo plc to acquire an interest in United Spirits Ltd. However, there is no certainty that these discussions will lead to a transaction”
A note from Edelweiss said: “the deal, if inked, will be positive for United Spirits as it will strengthen the company’s presence in the premium portfolio, where it has been losing out to key competitor Pernod Ricard.
Funds infused via the deal will also help deleverage the balance sheet. Foreign management could improve operational efficiency and boost margins, as the promoters are focusing more on other stressed group companies. United Spirits will also enjoy benefits of scale by setting up bigger manufacturing plants. Further, it could gain access to some international (emerging) markets.”
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