The PMLA court, however, said in case Mallya is found innocent later, the banks will have to restore the properties back to Mallya after recovering their dues.
Meanwhile, the latest stake purchase will help Heineken
to consolidate its market share in India through UBL and offer additional products to the Indian consumers.
The street perceives this as a positive with Emkay Global Research’s Ashit Desai highlighting that the increase in ownership may drive higher involvement and support from Heineken.
However, he doesn’t see material benefits in the medium term as the company is run efficiently with market leadership, stronger profitability and access to Heineken’s portfolio.
Credit Suisse, however, believes that full control for Heineken would mean more focus on improving mix and profitability at UBL. Say Arnab Mitra and Pratik Rangnekar of the foreign firm, “Once Heineken takes full control of the business, we expect greater focus on premiumisation with brands like Amstel and Heineken Silver, and on cost efficiencies to improve operating profit margins.” Amstel, which has a presence in 10 states, has gained market share in the March quarter. Moreover, the premium portfolio (Heineken Silver, Ultra Witbier, Amstel) has grown ahead of the overall portfolio in the quarter.
In addition to the stake consolidation, volume recovery and margin gains will be key triggers for the stock which shed 3.7 per cent in trade on Wednesday after scaling a new high of Rs 1,497.65 in intra-day trades. The company’s volumes grew 8 per cent in the March quarter after five consecutive quarters of year-on-year decline with the total number of cases crossing the 40 million mark. The volume growth in the quarter was led by most markets barring Telangana, Odisha and Delhi. Desai of Emkay Global Research expects a faster recovery than the first lockdown given benign taxation, earlier reopening of on-premise trade (bars, pubs, restaurants) and ongoing vaccination.
Given the higher input costs, the street will keep an eye out on margin trends. While gross margins were below expectations in the March quarter, tight control on costs helped the company post a strong 16.9 per cent operating profit margin. While glass prices are stable and availability should improve post lockdown, barley prices continue to remain high. This could impact margins in the June quarter as recovery was cut short mid-way by the second wave.
The stock is up 14 per cent since the start of May and is valued at 47 times its FY23 earnings estimates. These gains along with the market regulator Sebi on Tuesday exempting Heineken International from making an open offer to the shareholders of UBL for its additional stake purchase can be attributed to Wednesday’s correction.
Given the low levels of consumption, expectations of market share gain from spirits, lower tax rates (Haryana, West Bengal and Uttar Pradesh) and premiumisation, most brokerages are positive on long term growth prospects. Investors can consider the stock on further corrections.
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