India’s largest liquor company United Spirits saw its net sales slip by seven percent in the third quarter of financial year 2016-17 on the back of demonetisation, the company said in its earnings release. It reported a net sales of Rs 2,494.3 crore for three months ended December 2016 as compared to Rs 2,680.2 crore in the year-ago period.
The company’s earnings before interest, taxes, depreciation and amortisation fell by 44 percent to Rs 293.36 crore. EBITDA margins for the quarter stood at 11.8 percent as against 19.6 percent in the corresponding quarter in the last financial year.
Profit after tax rose nearly four-fold to Rs 147.7 crore in the third quarter.
Change In Operations Model
United Spirits moved to a franchise-led model for selected brands, mainly the ‘Popular’ brand in Andhra Pradesh, Puducherry, Goa, Andaman and Nicobar Islands. It also moved to a complete franchise agreement for all USL brands in Kerala. These pacts are for a period of 3-5 years and are effective January 2017.
The volume and net sales for the franchised brands accounted for 7.4 million cases and around Rs 480 crore in net sales, the company said.
The company expects an annualised income from royalty from these brands at around Rs 100 crore. The royalty would be accounted as part of net sales.
Bihar Liquor Ban
The company disclosed that it has receivables of Rs 84.66 crore from state-owned Bihar State Beverages Corporation Ltd, which it is hopeful of recovering. The company has also filed an application seeking compensation from the Bihar government for losses suffered as a result of “arbitrary” imposition of prohibition.
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