Pioneer Distilleries to merge with United Spirit, stock dip

On Monday, the Board of Directors of United Spirits has approved the proposed merger of the company's listed subsidiary, Pioneer Distilleries, with the company. The Scheme is subject to the receipt of requisite approvals from the relevant statutory authorities.

Pioneer Distilleries is involved in the business of manufacturing and sale of extra neutral alcohol, malt spirits, Indian Made Foreign Liquor (IMFL) and other allied products, including bottling operations. As of FY19, the company generated revenue of Rs. 142.8 crores. The company has been incurring losses that have resulted in the negative net worth of Rs. 41.6 crores.

One of the reasons for this merger is overcoming limitations on raising capital for POL, ensuring improved allocation of capital and optimum cash flows contributing to better utilisation of capacity and the overall growth of the combined entity. Further, the merger is expected to simplify the corporate structure and consolidation of the group's business and reduce compliance and interest cost.

This transaction will be settled on a share exchange basis: For every 47 equity share of Pioneer Distilleries, United Spirit will issue 10 equity shares.

The stocks of United Spirits and Pioneer Distilleries were trading in negative terrain in today’s trading session. United Spirits was down by nearly 2 per cent from the previous close while Pioneer Distilleries tanked nearly 5 per cent from previous close to an intra-day low of Rs. 130.7.