United Spirits shares surge 8%, Kingfisher down

United Spirits shares surge 8%, Kingfisher down

Shares in United Spirits surged over 8 per cent on Thursday defying the weakness in broader markets. The stock's 10-session winning streak was interrupted in the special Muhurat trading on Tuesday, but buying interest is back in the counter on the back of $2.1 billion deal with Diageo announced on Friday.

At 09.55 a.m., the stock traded 7.5 per cent higher at Rs 1,940 on the BSE.

"With a lot of debt out and a new management, the stock is likely to keep going up. Even Rs 2,000 does not look difficult on the stock,” market analyst Avinash Gorakshakar said.

On Monday, United Spirits had posted its biggest single-day share gain since at least 1995 after its stake sale to Diageo spurred upgrades from several analysts, who called the deal "transformational" and a "game changer" for the Indian liquor maker.

Morgan Stanley, JPMorgan and CLSA had raised their ratings to the equivalent of a buy, saying United Spirits will substantially cut its debt and improve its profits after its deal to sell a 53.4 per cent stake to Diageo.

Under the deal announced on Friday, Diageo would first buy a 27.4 percent stake from United Spirits' founders at Rs 1,440 per share, and then launch a mandatory open offer for the remainder.

The deal would pair together the global maker of Johnnie Walker with a domestic company owning a portfolio of spirits including the popular McDowell's whiskey in India.

What's happening to other UB group stocks?

Kingfisher Airlines:

The debt laden carrier traded 4 per cent lower at Rs 14.22 on the BSE. It has failed to pay May salaries to employees as promised in October. The proceeds from the deal with Diageo will not be enough to rescue the ailing airline, which has failed so far to find fresh investment to prop it up. Kingfisher needs to raise or commit at least $1 billion by November 30, according to the State Bank of India, the leader of a 17-bank consortium that has lent about $1.4 billion to the carrier. Kingfisher Airlines has an accumulated debt of over Rs 8,000 crore and losses of over Rs 9,000 crore.

United Breweries:

The stock had surged over 15 per cent on Tuesday, but saw profit booking today. The stock traded 7 per cent lower at Rs 815.95 on the BSE. The strong gains on Tuesday had come on the back of the stock's addition to the MSCI Global Standard Indices, effective November 30, 2012. The move is likely to result in fund flows into the counter.

UB Group Holding:

The stock traded nearly 3 per cent lower at Rs 131.50 on the BSE.

(With inputs from Reuters)