Hong Kong/Mumbai, Nov 9
British alcohol beverages giant Diageo Plc has agreed to buy a 53.4 percent stake in liquor baron Vijay Mallya's United Spirits Ltd for US $2.1 billion, giving the world's biggest spirits group a larger slice of a fast-growing market.

The purchase, which concludes an on-again, off-again courtship that began in 2008, would be the biggest inbound Indian M&A deal since British oil firm Cairn Energy Plc sold a majority stake in its Indian business to Vedanta Resources Plc last year.

The deal also comes amid increased brewery M&A activity in the Asia-Pacific region. Heineken NV won full control of the maker of Tiger beer in a S$7.9 billion deal in September. That was preceded by SABMiller Plc's A$11.5 billion acquisition of Foster's in December last year.

Diageo will initially acquire a 27.4% stake from the founders of United Spirits, and subscribe to new shares to be issued by the firm at Rs 1,440 apiece. That's a premium of around 7% to the company's close on Thursday.

Diageo will then launch a mandatory open offer for an additional 26 percent from public shareholders at the same price, giving it a majority stake in United Spirits, Diageo said in a statement on Friday.

The agreement comes after months of haggling and will ramp up Diageo's presence in the world's largest whisky market. The deal will also help Mallya gain much-needed cash to reduce the debt borne by United Spirits and free up funds to revive his grounded Kingfisher Airlines.

"Some of the Mallya group companies have been in turbulence for some time. This is his final opportunity to revive the fortune of the group," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors Ltd in New Delhi.

Shares in Mallya-controlled companies rose after Reuters reported the deal terms earlier on Friday, citing an internal memo. Under the terms of the deal, Mallya would remain as chairman of United Spirits.

United Breweries will have 14.9% of the current share capital in United Spirits after the deal, according to the statement. The two companies said in September that they were in talks about a possible deal.

Diageo, the maker of brands including Johnnie Walker whisky, Guinness beer and Smirnoff vodka, held talks with United Spirits in 2008 that collapsed the following year.

RAISING FUNDS: Mallya has been scrambling for nearly a year to raise funds for Kingfisher, prompting speculation that he may offload a stake in United Spirits or United Breweries Ltd, the maker of Kingfisher beer.

Some analysts, however, said the deal may not be enough to revive Kingfisher Airlines. The Centre for Asia Pacific Aviation has said a fully funded turnaround for Kingfisher would cost at least $1 billion.

"At this moment, Kingfisher may be a difficult cause to revive. As other UB Group companies are also quite overleveraged, I think they will prioritize restructuring other group companies ahead of Kingfisher Airlines," Thunuguntla said. — Reuters

Mumbai, November 9
State Bank of India, the country's biggest lender, posted its smallest profit increase this year as bad loans constrained earnings growth, sending its shares lower.

Problem lending has risen to a record as India's worst economic slowdown in almost a decade clouds the outlook of the country's banks including SBI, which accounts for a quarter of all loans and deposits.

The state-owned bank, which has exposure to debt-laden firms such as Kingfisher Airlines Ltd , Air India Ltd and Deccan Chronicle Holdings Ltd , said bad loans rose to 5.15% of its loan book as of the end of September from 4.19% a year earlier.

Net profit for the quarter ended Sept 30 rose about 30% from a year earlier to Rs 36.58 billion. That compares with a more than doubling in net income in the previous quarter. Analysts, on average, had expected a net profit of Rs 35.69 billion, according to Thomson Reuters I/B/E/S.

Shares in SBI fell as much as 3.77% in trading on the Bombay Stock Exchange, the biggest decline in a week.

SBI has been aggressive in identifying bad loans and making adequate provisions since chairman Pratip Chaudhuri took reins of the bank in 2011. Still, problem loans at the bank are the highest in the industry. That, coupled with low capitalization, prompted ratings agency Moody's to downgrade the bank last year.

Bad loans increased by nearly 45% to Rs 492 billion in the September quarter compared with a year earlier, SBI said. Net interest income, or the difference between interest earned and interest paid out, rose nearly 63% during the period.

Large state-owned banks such as Punjab National Bank and Canara Bank earlier posted drops in net profit and a spike in bad loans in the fiscal 2013 second quarter, hurt by the economic slowdown. — Reuters

Mumbai, November 9
Disappointing performance from State Bank of India, Tata Steel and ONGC pulled down the BSE benchmark Sensex on Friday by 163 points to a one-week low of 18,683.68, extending fall to the second straight day.

Weakness in global markets on the back of overnight dip on Wall Street on Thursday on fiscal worries and earnings concerns also kept buyers on the sidelines, said brokers.

State-owned SBI on Friday reported a rise of over 30% in Q2 net profit but its non-performing assets ratio jumped to 5.15% from 4.19% a year ago period. It shares led the fall in Sensex with 3.89% loss.

Another PSU, ONGC, which on Thursday posted the steepest fall in quarterly profits in almost 4 years, faced heavy selling with its shares closing 3.05% down.

At the fag end of trade, Tata Steel reported consolidated loss of Rs. 363.90 crore for the July-Sept quarter, as against Rs. 212.40 crore net profit in the year-ago period. Its shares closed over 3.2% down.

The Sensex, which had lost 56 points on Thursday, opened higher at 18,894.42 but failed to sustain the initial momentum due to earning disappointments in blue-chips. It finally closed 162.58 points, or 0.86%, lower at 18,683.68.

Among the 30-share index, 26 stocks including ICICI Bank, RIL, Infosys, Tata Steel, L&T, Tata Motors, BHEL and HUL finished with losses.

On similar lines, the National Stock Exchange index Nifty fell by 52.50 points, or 0.91%, to 5,686.25 led by stocks in realty, metal, oil and gas and banks. — PTI

Chandigarh, November 9
The economic slowdown has begun to hurt not just banks’ credit takeoff but also recovery of advances. With NPA (nonperforming assets) levels rising in almost all sectors, priority sector lending by banks too has not remained insulated. Recoveries of loans extended under various government sponsored schemes has slowed down considerably.

Information gathered during the state level bankers committee meeting for Punjab and Haryana held here on Friday revealed the alarming proportions of variation in recoveries by banks of loans given under schemes like the Prime Minister’s Employment Generation Scheme, Swaran Jayanti Shehri Rozgar Yojana, Swaran Jayanti Gram Rozgar Yojna and in loans extended to self-help groups set up under various government schemes.

The fall in the rate of recovery of loans under these schemes is between 6% to 28% in Haryana and in between 9% to 44% in Punjab.

Taking up the sharp decline in recoveries of loans under these schemes, Rakesh Sethi, executive director of Punjab National Bank and convener of the two state level bankers committees, said that the dip was very alarming and sought the help of the revenue departments of both states to recover loans.

Sethi told The Tribune that the general slowdown in the economy had led to the poor recovery of not just loans under government sponsored schemes, but also in the total credit offtake. “Total credit offtake is down by almost 7 % over last year,” he said.

Sethi said the mounting irregularity in recovery of loans under government sponsored schemes could still be thwarted by holding meetings with self-help groups, since in Haryana the rate of recovery of loans to self-help groups was very poor.

The percentage recovery to self help groups had dropped by 22-28% between September 2001 and September 2012. Sethi has sought the help of the various state government agencies to recover the loans extended by banks.

Meanwhile, it is learnt the issue of poor recovery of loans was more prevalent in Punjab and Haryana, because the state governments that implement and monitor the use of these loans, make very less efforts to help banks in loan recoveries.

In many other states including Rajasthan the revenue department plays a pro active role as it gets a percentage commission for loan recovery.

It is learnt Punjab too had agreed to help banks recover these bad loans by charging a commission of two per cent. However, the memorandum of understanding to that effect between the state government and the state level bankers committee was not signed.

New Delhi/Mumbai, Nov 9
Gold prices may jump further by 20 per cent to touch Rs 32,500 per 10 gram here on the festival of Dhanteras, a day considered auspicious for buying the precious metal, bullion traders said Friday.

Bullion traders expect high prices would hit sales in volume terms by up to 30% compared to the last 'Dhanteras' sales, but jewellers like Geetanjali and P P Jewellers are hopeful of rise in sales by about 10% on Dhanteras which is falling on Sunday.

"Gold prices have risen by Rs 270 to Rs 32,040 per ten grams today taking strong global cues. Domestic prices are expected to rise by at least Rs 200-300 to touch Rs 32,500 per ten grams on Dhanteras on Sunday," All India Sarafa Association vice president Surinder Jain told PTI.

Gold prices were ruling at Rs 27,130/10 gms and Rs 19,740/10 gms on Dhanteras in 2011 and 2010, respectively, trade data showed. — PTI