Vijay Mallya -owned United Spirits (USL) is in talks with two distilleries ? Pioneer Distilleries and Sagar Distilleries ? for acquisition. The companies have brewing facilities in Maharashtra.
An all-cash deal of Rs 150-175 crore is expected to be announced by the month end, two persons involved in the talks told FE.
Promoters of Pioneer Distilleries include former prime minister late P V Narashimha Rao?s sons-in-law. Sagar distilleries is an unlisted entity. Pioneer scrip has already moved up by close to 50% since June.
Pioneer promoters had been souding out institutional investors since months for funds to bank roll their ambitious expansion plans. They are learnt to have asked for a substantial premium over the current market price to part with their stake in the company.
The company had recently expanded its ethanol capacity fourfold to 130,000 litres a day. It also doubled the alcohol production capacity, recently.
?We are working on cutting our dependence on ENA. We look to use more grain-based alcohol to offset the cost-push and availability. Some USL brands like Royal Challenge have become completely grain-based in recent months,? said a USL official involved in the talks. An e-mail sent to the USL?s president and MD Vijay Rekhi remained unanswered.
The Maharashtra government?s scheme for granting subsidy to distilleries using food grain for production of ethyl alcohol makes the distilleries based in the state profitable.
According to the government formula of subsidy of Rs 10 per litre, production of alcohol from grain becomes more than competitive, compared with alcohol made from molasses.
Justifying the need for such a scheme, the Maharashtra government is learnt to have stated in an affidavit filed in February that providing subsidy to the distilleries manufacturing food grain- based liquor is in the interest of the farmers.