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Comment: KKR sees value in Indian spirits

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US private equity major Kohlberg Kravis Roberts is reported to be interested in picking up a minority stake in Vijay Mallya’s United Spirits group, primarily by acquiring treasury stocks t

US private equity major Kohlberg Kravis Roberts is reported to be interested in picking up a minority stake in Vijay Mallya’s United Spirits group, primarily by acquiring treasury stocks that would give it a 14.8 per cent stake in the Indian company.

The world’s third-largest liquor marketer has already seen interest from international market leaders Diageo and Bacardi. In February, United Spirits chairman Mallya expressed confidence that Diageo would go ahead with its acquisition of up to 14.9 per cent of the firm, but he apparent remains keen to explore the possibility of a transaction involving financial investors even as talks continue with trade suitors.

KKR’s interest reflects widespread optimism about the growth prospects of India’s alcoholic beverage sector and in particular of United Spirits, the industry leader with a market share exceeding 55 per cent.

The private equity move comes at a time when United Spirits is looking at the option of issuing fresh shares rather than selling treasury stock. This could give the group more leverage in its discussions with potential investors over the sale of a stake that would allow it to reduce its debt burden.

It should be noted that the head of KKR’s Indian operations is none other than Sanjay Nayar, the former head of Citi India. Citi has been one of United Spirits leading bankers, providing financing for its acquisition of Whyte & Mackay in 2007.

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