United Spirits may provide ₹2,000 cr more for loans

BL 10 sep 2014

United Spirits is likely to make more provisions or writedowns for loans as the UK-based parent Diageo goes about cleaning up the balance sheet of the company.

Last week, United Spirits said that it has already made a total provision of ₹4,321 crore, including writedowns for Whyte & Mackay deal.

A UB Group spokesperson did not respond to queries regarding fresh provision for loans.

Arun Kejriwal, an analyst with a brokerage firm KRIS, said the additional provisions could be about ₹2,000 crore though it remains to be seen how much more the probe panel unearths cases involving unsecured loans.

An analyst with another brokerage firm said that while it was clear that more provisions could be made, it was not possible at this stage to put a number to it. “Usually, big MNCs like Diageo are very, very fast in cleaning up the accounts and in another couple of more quarters, one can actually see the results,” said the analyst, who cannot be named because his company does not allow him to talk to the media.

Probe panel

The board has already constituted a probe panel, which will be headed by United Spirits Ltd (USL)’s Managing Director Anand Kripalu, which will go into all transactions carried out by the company, role of individuals involved and potential non-compliance of regulations.

The board has allowed the panel chief to even hire independent advisors and consultants for this purpose.

The auditors of the company BSR & Co also noted that pending such inquiry, it is unable to comment on the nature of these transactions, the provision established or any further impact the profit and loss statement.

But Kejriwal felt that the bigger issue was whether Diageo carried out enough due diligence of the accounts of United Spirits before acquiring it.

“It is not about higher provisions but about the decisions made before buying stake in United Spirits,” he said.

Nomura has already said that there are several loose ends to the accounts of United Spirits and Diageo should not get sidetracked on sorting out the business.

Up borrowing limit

Meanwhile, the company in a listing with the BSE said that it seeks to increase the borrowing limit to ₹10,000 crore.

The company’s stocks were up by nearly 1 per cent to ₹2288.70 at the end of the day’s closing.