Investors advised to be cautious on bond issue

Investors advised to be cautious on bond issue

A Mumbai-based investor advisory firm has told United Spirits shareholders to tread carefully when they are asked to approve the distiller's plan to raise US$225m through a debt sale. 

Institutional Investor Advisory Services India has issued a ‘caution note’ to United Spirits shareholders ahead of the firm's general meeting on Friday (20 January), at which they will be asked to approve the issue of Foreign Currency Convertible Bonds.

USL’s mother company, the UB Group, has been struggling with financial difficulties arising from the failure of its subsidiary Kingfisher Airlines. There has been speculation that UB owner Vijay Mallya may use the conglomerate's other businesses to raise extra funds

Regarding the bond issue, the MD of Institutional Investor Advisory Services India Limited, Amit Tandon, told just-drinks that his firm has told investors "to look into whether there are any gaps in the proposal and to ask questions". In particular, he said shareholders need to know that the funds raised will not be used to for the beleaguered Kingfisher Airlines.

USL has stated that the bond issue will offset high-cost debts but will not be used for cross-funding between UB Group companies. USL officials were not available for further comment concerning Friday’s meeting.