According to CNBC, Vijay Mallya would be looking to sell a 12-13% stake in United Breweries, the market leader in India, for as much as $ 500m.
We remind that Mr Mallya currently owns 37.5% of United Breweries, while also owns 37.5% and the remainder (25%) is floated.
The current market capitalization of United Breweries is about INR 146bn, or about € 2.2bn. Hence the rumoured price of $ 500m for a 12-13% stake represents a premium of around 30-40% over the current share price.
Our View:
We understood that Mr Mallya is also active in the country’s troubled and very competitive airline industry through Kingfisher Airlines. Possibly a sale of part of the United Breweries stake could be used to fund operations of Kingfisher Airlines. Anyhow, although the rumoured price looks high (the stock is already today trading at a P/E12E of 65x based on Bloomberg consensus data), we would welcome to increase its shareholding in United Breweries, given the great long-term growth prospects (India currently has a per capita consumption of 1.5liters whereas countries with similar disposable income tend to have an average per capita consumption of around 20 liters). We stick to our BUY rating and € 50 target price.