The UB Group

PRESENTATION
ON
McDOWELL & COMPANY
UNITED BREWERIES LTD

27th October 2005

 India’s
The UB leading
Group- Andrinks group
introduction
Beer :
 48%
• The UB Group,market
is theshare nationally
market leader in both Spirits &
 Sold in
Beer business in over 52 countries
the country
 India’s 1st global consumer brand - Kingfisher
• The Group has a turnover of Rs 3700 crores
Spirits :
• The core
 54%Beverage Alcohol business account for 80% of
market share in the domestic market
the group
 2turnover
nd
largest player in the world
• Other interests
 Both businessesinclude Fertilizer,
poised Engineering
for spectacular , Life
growth
 Infrastructure
Science, Compelling demographics
development & Media
 Rapid
• The Group rise in disposable
is professionally income
managed and is headed by
 Changing lifestyle & spending pattern
Dr Vijay Mallya, the Group Chairman
 Slow but sure dismantling of regulatory
controls

UB UB Group
Group (India)
(India)
 The Market for Beverage Alcohol
Regulatory environment :

• The Indian market is highly regulated,

highly restricted and highly taxed.

• Licensing requirement exists for Raw material

procurement, Stocking of raw material, Production,
Inter-state movement, Retailing and Distribution.

• Controls also exist on Brand entry, Advertising,

Distribution & Pricing.
These regulatory hurdles constitute
an entry barrier to the industry

UB Group (India)
 The Indian Market
Re-distribution structure –
• Government market (65%) –State government is the
sole distributor
• Auction market (16%) – State government auctions
geographical territories which has led to monopolies /
cartels
• Free market (19%) – Through trade licenses
• Bargaining power in the distribution network is
commanded by players with premium brands, large
volume base and product range

The UB Group enjoys a unique advantage as the

Leader in both Spirits and Beer Segments
UB Group (India)
 The Indian Market
Spirits Market -
• India is a 112 million cases market, growing at around
9-10% p.a
• Armed Forces – another 12.5 million cases
• Whisky dominates – 62%
• Low Spirits consumption – Per capita < 2.1 liters p.a
• Changing lifestyle, exposure to global trends fueling
growth
• MNC’s entered 10 years ago, but yet to emerge strongly
• Industry has seen some shakeout consequent to
marginalization of smaller players

UB has aggressively consolidated its leadership position by

- Acquiring brands (Gilbeys Whisky) & Companies (SWC)
- Investing heavily in brand building
UB Group (India)
 Acquisition of Shaw Wallace

• Shaw Wallace was the 2nd largest player in spirits in India

(MS - 15%).
• UB Group acquired ~ 55% stake for a consideration of
Rs.13,000 mio in July 2005
• Stakes increased to 75% through open offer.
• Valuation underpinned by growth prospects and synergies
arising from combined MS.
• Vision to bring all Spirits business together and create
“United Spirits”
• Combined business would be amongst top 50 private
sector companies in India.

Combined brand portfolio gives leadership in ALL

flavors, geographies and price points
UB Group (India)
 Restructuring Mechanics
Phase I
• Investment division of McD to be demerged into NewCo
– All non-spirits investments to be demerged
– Demerged entity to have mirror shareholding as McD
• Merge all operating spirits companies into McD
–Swap ratios decided basis KPMG & Haribhakti valuations
• SWC itself may be merged few months later upon resolution of tax
/ other litigations
- However McD will directly hold 75% of SWC even in the
interim stage
Phase II
• Merger of SWC & its upstream overseas holding companies into
McD
– McD’s holding in SWC to be transferred to a Trust
– SWC’s holding in McD to be cancelled

UB Group (India)
 Restructuring Process – Status Report
• Merger schemes of Phase I filed with Stock Exchanges
• Time frame for completion of mergers
• April – May 2006
• Appointed date April 1, 2005
• Following entities being merged
• McDowell & Company Limited (Listed)
• Herbertsons Limited (Listed)
• Triumph Distillers & Vintners Private Limited
• United Distillers India Limited
• Baramati Grape Industries Limited
• Phipson Distillery Limited
• United Spirits Limited
• Asian Opportunities & Investments Limited
•McDowell International Brands Limited
•Zelinka Limited
• Shaw Wallace Distilleries Limited together with its subsidiaries
• Non-spirits Investments being divested into McDowell India Spirits
Limited, a wholly-owned subsidiary

UB Group (India)
 Mergers…update
• Filing of schemes with Stock exchanges
completed
• Schemes to be filed with courts –1 st week of
December’05
• Court convened meetings- Mid January
• Final hearing by Courts –End March ’06
• Filing of orders with RoC and listing by end
April ‘06

UB Group (India)
 Sales Performance HY–I -- FY’06

Million cases
%
Company Line
HY-I FY’04 HY-I FY’05 Grwth

Main
line 9.39 11.16 19%
McDowell
TOTAL 12.39 13.51 9%

Million cases
%
Company Line
HY-I FY’04 HY-I FY’05 Grwth

Main
‘UNITED line 18.83 23.33 24%
SPIRITS’ TOTAL 27.13 30.17 11%

UB Group (India)
 Resultant
McD Results Structure
Sep’05
UBHL & Associates

Rs Crores
YoY X%
2005 2004
Net sales 17% 630.57 541.2

Cost of goods Sold y% 400.26 63% 337.32 62%

Trust MCD (Spirits) Public
staff cost 41.68 7% z% 41.57 8%
Advt & Sp 36.72 6% 38.84 7%
Other overheads 79.43 13% 83.58 15%
EBITDA 82% 72.49 11% 39.90 7%

Interest /Finance cost 36.74 15.4

UBHL & Associates

Depreciation 7.49 7.86

42.47%
Profit before Tax 70% 28.26 4% 16.65 3%

Tax 12.26 MCD 6.73

(Investments)* Public
57.53%
Profit after Tax 61% 16.00 3% 9.92 2%

UB Group (India)
* Includes non-spirits investments Aventis, Mangalore Chemicals, UBHL, UBL etc
 United Spirits Sep ‘05
Rs Crores
USL
Net sales 957.22

Cost of goods Sold 477.22 51%

EBITDA 122.16 13%

Interest/Finance cost 75.39
Depreciation 12.21

PBT 34.56 4%

UB Group (India)
 Brand Performance HY–I -- FY’06
Brand FY’05 FY’06 % Grwth
Bagpiper Whisky 3.49 5.45 56%
McDowell’s No.1 Whisky 2.56 3.02 18%
McDowell’s No.1 Brandy 2.32 2.80 21%
McDowell’s Celebration Rum 2.03 2.18 7%
McDowell’s Signature Whisky 1.48 2.04 38%
Old Cask Rum 0.82 0.82 1%
Gilbey’s Green Label Whisky 1.15 1.11 (4%)
Blue Riband Gin Series 0.56 0.56 1%
Gold Riband Whisky 0.46 1.04 127%
Antiquity Rare Whisky 0.04 0.06 53%
Royal Challenge Whisky 0.44 0.46 6%
Director’s Special Black Whisky 2.27 3.49 54%
Director’s Special Whisky 1.93 2.38 18%
White Mischief Vodka 2.78 4.20 51%
UB Group (India)
 Raw Material Price Trends
• Spirit prices have been rising since early 2004
• Failed sugarcane crop
• Increased dosage of alcohol in motor spirit
• Spirit prices softening – but quantum step-up from earlier levels
• Furnace Oil prices spiralling
7,000 40.00

35.00
6,000

30.00
5,000

25.00
4,000
Rs. / MT

Rs. / BL
20.00

3,000
15.00

2,000
10.00

1,000
5.00

- 0.00
'94-95 '95-96 '96-97 '97-98 '98-99 '99-00 '00-01 '01-02 '02-03 '03-04 '04-05 APR MAY JUNE JULY AUG
05 05 05 05 05

UB Group (India) MOLASSES Rs/MT RECTIFIED SPIRIT Rs/BL ENA Rs/BL

 Trends - Realization & Costs
• Cost push offset by
• Increase in NSR
• Decrease in market spends
• Strategic buying of raw material including stock build-up
• Increase in NSR / Decrease in Spends
• UB has been in the forefront of the industry initiatives to drive
prices up and spends down
• Have spearheaded industry meetings with State Govts to
obtain price increases e.g. TN, Kerala, Delhi, Rajasthan
• McDowell’s NSR increase Rs 29 / case
• Decrease in COG
• Stocks built up pre-April 2004 cushioning impact of the rise in
prices
• Imported molasses
• Strategic timing of purchases to effect price reductions
• Result:
• HY-I costs of FY’04 are still lower than HY-I of FY’05 by
Rs.19/case
• Fuel cost impact accounts for Rs.5/case
UB Group (India)
 Trends - Realizations & Costs (contd.)
• Brand building exercise continues
• Packaging Innovations introduced; Others on the anvil
• Reduces costs; beats counterfeiting
• Tetra packs
• Pouch Packs to replace mono-cartons
• Other Tamper-proof and tamper-evident packaging
• Synergies
• Detailed exercise undertaken with help of Accenture to
identify potential areas
• Procurement
• Market spends
• Terms of Trade
• Removal of clashing interests e.g. Competing Brands,
Duplicate Mfg Sources
• Duplicate Services / Infrastructure
• Costs of Business e.g. levies

UB Group (India)
 Synergies – Costs & Revenues

• Total synergies estimated in excess of Rs 100 cr on a sustainable

basis (Rs 0.50/bottle)

• Major synergies from areas other than consumer price increases

• Majority of revenue synergies not quantified

UB Group (India)
 Outlook FY’06 United Spirits

• Sales Volumes > 61 million cases

• Bagpiper – India’s Largest Alcobev brand > 11 million cases

• McDowell’s No.1 family - ~ 17 million cases

• EBITDA Rs. 275 crores

•Realization of synergies would have commenced in full swing

UB Group (India)
 The UB Group- An introduction

• The UB Group, is the market leader in both Spirits &

Beer business in the country
• The Group has a turnover of Rs 3700 crores
• The core Beverage Alcohol business account for 80% of
United Breweries Limited
the group turnover
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman

UB UB Group
Group (India)
(India)
 The Key Highlights
UB Group- An introduction
• PBDIT (UBL) for the half year Rs. 64.3 crores, and
increase
• The of Rs.40.5
UB Group, is the crores
marketversus
leaderlast yearSpirits &
in both
Beer business in the country
• PBDIT (Combined business) Rs. 78.1crores, and
• The Groupof
increase has a turnover
Rs.68 crores of Rs 3700
versus last crores
year
• The core Beverage Alcohol business account for 80% of
• Volume
the growth of 22% in UBL & in the combined
group turnover
business and continues to outperform the industry
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• Price increases achieved in a number of key states
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman
• Interim dividend of 15% paid by UBL

• UBL - Winner of Super brands award

UB UB Group
Group (India)
(India)
 TheSummary P introduction
UB Group- An &L
Profitability Statement Half year ended Year ended
United Breweries Limited 30.9.2005 30.9.2004 31.3.2005

• The UB InGroup, is the market leaderUnaudited

rupees crore
in both SpiritsAudited
&
Income
Beer business in the country
N et Sales/ Income from operations 272.00 211.93 453.91
Other Income 9.08 3.64
• The Group has a turnover of Rs 3700 crores
Total Income 281.07 215.57 453.91
Expenditure
• The core Beverage Alcohol business
Cost of Production107.09account for 80%209.12
104.94 of
Advertisement & Sales Promotion 69.03 52.47 110.17
the group turnover
Other operating Cost 40.64 34.36 78.01
PBIDT 64.31 23.80 56.61
• Other interests include Fertilizer, Engineering , Life
Finance charges 10.39 14.61 20.82
Depreciation 5.68 4.39 10.57
Science, Infrastructure development & Media
Profit Before N on recurring items &Taxation 48.24 4.80 25.22
N on Recurring items (13.18) -
• The Group is professionally managed and is headed by
Provision for Taxation (11.18) (17.17) (1.20)
Profit after tax 17.90 3.60 14.04
Dr Vijay Mallya, the Group Chairman
COMBIN ED BEER BUSIN ESS
PBIDT 78.14 10.12
Finance Charges 26.61 25.45
Depreciation 16.14 15.57
Profit Before Taxation 35.39 (30.90)
UB UB Group
Group (India)
(India)
 Key
TheDrivers ofAn
UB Group- Performance
introduction

• •Volume
The UB Group, is the market leader in both Spirits &
growth
Beer business in the country
• •Implementation of price increase in key
The Group has a turnover of Rs 3700 crores
•states
The core Beverage Alcohol business account for 80% of
• the
Reduction in cost of sales driven by bottle
group turnover
• Other interests include Fertilizer, Engineering , Life
cost
Science, Infrastructure development & Media
• •Synergized operation between UBL &
The Group is professionally managed and is headed by
MAL
Dr Vijay Mallya, the Group Chairman

UB UB Group
Group (India)
(India)
 Market
The UB Share
Group- Movements
An introduction
2003-04

• The UB Group, is the market leader in both Spirits &

M M, 6
Others, 17

UBL, 46 UBL

Beer business in the country SAB

MM
Others
• The Group has a turnover of Rs 3700 crores
SAB, 31
2004-05

• The core Beverage Alcohol business account for 80% of Others, 16

M M, 5
UBL
the group turnover UBL, 48
SAB
MM

• Other interests
Apr to Sept 05
include Fertilizer, Engineering , Life
SAB, 31
Others

Science, Infrastructure development & Media

• The Group is professionally managed and is headed by
Others, 17
UBL
M M, 6
UBL, 49 SAB

Dr Vijay Mallya, the GroupMOthers

Chairman
M

SAB, 28

UB UB Group
Group (India)
(India)
 Volume Performance
The UB Group- An introduction

• The UB Group, is the market

Volume leader in both Spirits &
Performance
Beer business in the country
100
• The Group91has a turnover of Rs 3700 crores
90
• The80core Beverage Alcohol business account for 80% of
Volume - mio cases

70
the group turnover 57 Industry
60
• Other
50 interests include
44 Fertilizer, Engineering , LifeUB
36
40
Science, Infrastructure development & Media Combined
27
30 22 22
• The20Group is professionally managed and is11 headed by
9
Dr Vijay
10 Mallya, the Group Chairman
0
2004-05 Ytd Sept 05 Qtr Sept 05

UB UB Group
Group (India)
(India)
 Analysis by Pack
The UB Group- Type
An introduction
Pack Salience Sept 04
Draught

• TheBottle
UBPintGroup, Cans
is the market leader in both Spirits &
1%

10% 1%
Beer business in the country
• The Group has a turnover of Rs 3700 crores
Bottle Quartz

• The core Beverage Alcohol business account for 80% of

88%

the group turnover

Pack Salience Sept 05
• Other interests include Fertilizer, Engineering
Draught
, Life
1%
Science, Infrastructure development & Bottle
Media Pint
Cans
2%
11%

• The Group is professionally managed and is headed by

Dr Vijay Mallya, the Group Chairman
Bottle Quartz
86%

UB UB Group
Group (India)
(India)
 Average
The Realization
UB Group- Anand Cost of sales
introduction
Sales Realization Cost Index Realization drivers:
140
• The UB Group, is the market leader • Andhra – Price revision after 7
129in both Spirits &
years
120
Beer business in the country
115 • Kerala – Price revision after 4
106 years
100 100
• The Group has a turnover of Rs 3700 crores
• Delhi – Matched Kerala prices
80
• The core Beverage Alcohol
72 business account for –80%
• Rajasthan of market to
Auction
68 70 Govt. distribution, policy changes
60the63
group turnover
• Price increases in 2004-05 to
40• offset bottle cost maintained
Other interests include Fertilizer, Engineering , Life
Cost Drivers:
20Science, Infrastructure development & Media
• Rationalization in bottle prices
0• The Group is professionally managed and is headedof by
• Optimization Power & inputs
costs
Dr Vijay Mallya, the Group Chairman
SR • Synergy of operation –
COS economies of Scale

UB UB Group
Group (India)
(India)
 Cost
The UBofGroup-
SalesAnAnalysis
introduction
Cost to Sales - Ytd Sept 05

• The UB Group, is the market leader in both Spirits &

Beer business in the country
Bottles

• The Group has a turnover of Rs 3700 crores 41%

• The
Otherscore Beverage Alcohol business account for 80% of
59%
the group turnover Cost to Sales - Ytd Sept 04

• Other interests include Fertilizer, Engineering , Life

Science, Infrastructure development & Media
Others

• The Group is professionally managed and is headed by 48%

Bottles
Dr Vijay Mallya, the Group Chairman 52%

UB UB Group
Group (India)
(India)
 Integration of UBL
The UB Group- and MABL
An introduction

• •Rationalisation
The UB Group, is the market leader in both Spirits &
of brand portfolio by state
Beer business in the country
• •Changes to sourcing of beer to achieve least
The Group has a turnover of Rs 3700 crores
•cost supply
The core Beverage Alcohol business account for 80% of
• the
Closure of Mumbai based MABL head office
group turnover
• Other interests include Fertilizer, Engineering , Life
• Science,
Synergies taken in the areas of:
Infrastructure development & Media
• –The
Raw material
Group procurement
is professionally managed and is headed by
Dr– Vijay
Marketing andGroup
Mallya, the promotional
Chairman costs
– Headcount
UB UB Group
Group (India)
(India)
 TheTrading
UB Group-Outlook
An introduction

• Strong volume performance expected to continue

• The UB Group,
– Strong is thetomarket
beer segment continueleader
lead in both Spirits &
• Beer business
Hardening ofinraw
thematerial
country costs
• The Group has a turnover of Rs 3700 crores
– Barley
• • Other Costs
The core in line Alcohol
Beverage with thebusiness
growth account
in volumefor 80% of
• the
Substantial capital expenditure – over Rs.400 crore
group turnover
approved by the board to be incurred over a period of
• Other interests include Fertilizer, Engineering , Life
seven years to meet the growing demand
• Science,
ProposalInfrastructure development & Media
to discuss merger of various subsidiaries, in
•place – Substantial
The Group improvement
is professionally in cash
managed and profits.
is headed by
Dr Vijay Mallya, the Group Chairman

UB UB Group
Group (India)
(India)
 The UB Group- An introduction

• The UB Group, is the market leader in both Spirits &

Beer business in the country
• The Group has a turnover of Rs 3700 crores
THANK
• The core Beverage YOU account for 80% of
Alcohol business
the group turnover
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman

UB UB Group
Group (India)
(India)