UB (Holding) Ltd

MP: Rs 38 BUY

01 Nov 2004

United Breweries (Holdings) Limited, is the flagship company of UB Group of Vijay Mallya. The demerger of brewing business from the erstwhile United Breweries Ltd to a separate company left the company with investments in the group companies and real estate business. Today, UB Group is an Rs 3000-cr conglomerate with diverse interests in brewing, distilling, pharmaceuticals and engineering.

See the Investment Portfolio of UB Holdings in listed companies alone!

Investment Company / No of Shares held / Cost of Investment / Mkt Price / Mkt Value
United Breweries / 2,726,632 / 62.90 / 148 / 40.35
Herbertsons / 2,246,756 / 3.22 / 151 / 33.93
Mangalore Chem. / 9,043,797 / 13.46 / 9 / 7.78
McDowell & Co. / 21,800,934 / 72.28 / 68 / 148.25
UB Engg. / 3,726,749 / 10.38 / 7 / 2.61
Aventis Pharma / 2,348,370 / 0.19 / 975 / 228.97
Unitel Commun. / 1,729,400 / 0.83 / 5 / 0.78
GMR Ind.. / 200,000 / 0.50 / 50 / 1.00
Total in Rs Crores / 163.76 / 463.66

When you buy 1000 shares of UB Holdings Limited, you get the following shares indirectly:

Value Rs.

1000 shares of M C Dowel / 68,000
100 shares of Aventis / 100,000
125 shares of UB / 18,500
100 shares of Herbertson / 15,000
Plus Bayer crop etc / 10,000
Total / 211,500
your investment / 38,000
UB Holdings is developing ‘UB cITy’, at itsvaluable property at Bangalore; can fetch lease rentals more than Rs.20 Cr every year!

The development of UB CITY is well under way, and construction of the entire complex comprising office space, retail, entertainment, restaurants & food courts, and serviced apartments amounting in all to 8,60,000 sq ft is progressing well. The first phase of 4,80,000 sq ft would be completed in 2006. Once completed, companies’ share of the constructed area should conservatively fetch in excess of Rs 20 crores per annum by way of rental, thus providing a steady cash flow to the Company.

Unlocking Value
To unlock hidden value, the managementis claiming to have initiated several steps to realize the full potential of its various business investments and other assets for the benefit of all stakeholders. Company has 15 subsidiary companies despite the above mentioned huge wealth.
Company has a debt burden of Rs.340 Cr against an estimated wealth of Rs.1000 Cr. The Intrinsic Value per share is above Rs.300. If the management decides to reward the shareholders by consolidating the operations of the company and managing the finances properly, the stock could be Ten-bagger!

Promoter Dr Vijay Mallya and associates’ total exposure in the 3000 Cr group is valued at a meager 100 cr. And it’s much below 50%.

Promoter’s Holding UB Holdings Ltd / %
Dr Vijay Mallya / 12.73
Kamsco Industries Pvt Ltd / 5.84
Gem Investment & Trading Co Pvt Ltd / 2.57
Mallya Pvt Ltd / 5.84
Devi Investments Pvt Ltd / 1.11
Total (66,16,882 shares) / 29.22

NB: MC Dowel holding is excluded from promoter’s stake as 100% of promoter holding in MC Dowel is by UB Holding Ltd.

Promoter’s Holding in United Breweries / %
Dr Vijay Mallya / 10.78
Kamsco Industries Pvt Ltd / 4.94
Gem Investment & Trading Company Pvt Ltd / 2.18
Mallya Pvt Ltd / 4.94
Total ( 44,09,254 shares) / 24.74

NB: Stake of MC Dowel and UB Holdings excluded,for the reason mentioned above.

Kingfisher Airlines

Kingfisher Airlines Ltd. has been set up as an ultimate subsidiary of UB Holdings Ltd. to pursue the highly potential air travel business in India. Aimed primarily at the value and aspiration seeking corporate traveler and discerning vacationer, Kingfisher Airlines will provide a new and unique experience in the air on board its fleet of new modern Airbus A 320 aircraft.

In spite of the initial apprehensions, one can not rule out the success of this venture.‘’India today, has an extremely poorly developed Civil Aviation Sector, with only a few African countries traveling less per capita than Indians. Our entire population of over 1.1 billion people is served by a mere 150 planes as compared to over 750 aircraft in China. Malaysia, with a population of 23 million has as many air travelers as India! More people travel by rail each day than the traffic of the entire Aviation Sector over a year!’’

At current price of Rs 38, stock is valued at a market capitalization of Rs 86 Crores. Company is still making losses due to heavy interest burden. Large exposure is not advised as it belongs to high-risk high-reward category.

The note is prepared by Porinju Veliyath, Chief Portfolio Manager
Disclosures

The authors may have held / hold the above-mentioned securities in their personal accounts or on behalf of the clients. The information contained has been obtained from sources believed to be reliable. While taking utmost care in making the report, the authors or the company does not take responsibility for the consequences of the report. All investment and information and opinion are subjected to market risk.