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Wednesday, February 13, 2013

United Breweries (Holding) Ltd: Should We Sell? 
CMP: Rs.70.25
After a stray media news (no clarification coming from the company) on Kingfisher Airlines Ltd, some of the investors have started to sell of the shares of United Breweries Holdings Ltd, out of panic. CLICK HERE
But the media did the same thing with Suzlon Energy Ltd too, if you can recall. I feel with no clarification coming from the company's end, it would be too childish to go for selling of the shares of U B Holdings Ltd. Many investors do not know the vastness of U B Holdings Ltd, let us take a re--look. 
United Breweries (Holding) Ltd (BSE Code:507458) holds around 24.44 % shares in KFA Ltd and hence if there is a problem in the  latter the shares of former will also suffer. But that is not the full story. 
Let us consider the following cases too:
(i) In United Breweries (Holding) Ltd the family of Dr.Vijay Mallya, had direct holding of 7.91% which means this is one of the family jewels of Dr.Vijay Mallya.
(ii) In UNITED BREWERIES LTD, a Dr. Vijay Mallya Group Company, the United Breweries (Holding) Ltd, holds 11.46% of the shares. Now at Rs.650, per share, you can calculate the value of the holdings. 
(iii) In UNITED SPIRITS LTD, another Vijay Mallya Group Company, this company holds 18.03% of the shares. Now at Rs.1897, you can find the value of the holdings. 
(iv) In UB ENGINEERING LTD, it holds 37.18 %, of the shares. Now at Rs.26.75 you can find the value of the holdings. 
Now you can calculate the total valuation of its holdings in all these companies and its exposure to Kingfisher Airlines Ltd (KFA Ltd), even if the said airlines sinks. 
Apart from that, the consortium of Banks, which  has exposure to Kingfisher Airlines Ltd, has the shares of United Spirits as collateral which is valued at Rs.6,500 crore.  This does not include the Kingfisher brand. It may be recalled that Kingfisher Airlines Chairman Vijay Mallya has given personal guarantee for the loans.  
Seventeen banks have an exposure of Rs 7,000 crore to Kingfisher Airlines, in which SBI's share of Rs 1400 crore is the largest. Some of the other banks with exposure to KFA are Bank of India (Rs 575 crore), IDBI (727 crore), Punjab National Bank (Rs 710 crore) and Bank of Baroda (Rs 530 crore).
So, it is everyone's guess how much any negative news, in KFA Ltd will affect the shareholders of United Breweries Holdings Ltd. 
Therefore, I find no justification of selling the shares of U B Holdings Ltd at Rs.70.25 just because there is a media report in Kingfisher Airlines Ltd. The other concerns of U B Group is doing fine and I am sure, Dr.Vijay Mallya will find some method to bring back to life, Kingfisher Airlines Ltd.