cci: United Breweries may have to raise debt to pay CCI penalty: Motilal Oswal report

cci: United Breweries may have to raise debt to pay CCI penalty: Motilal Oswal report

The Competition Commission of India () penalty of Rs 752 crore on is a significant sentiment dampener for the company, said Motilal Oswal in an investor report. The brokerage firm maintained a sell rating on UBL’s stock with a 27% downside.

On Friday, India’s competition watchdog found top beer companies United Breweries, Carlsberg India and Anheuser Busch InBev India to have indulged in cartelisation that involved price fixing for over a decade, and fined UB and Carlsberg over Rs 870 crore.

“UBL had cash and cash equivalents of Rs470 crore at the end of FY21. As per our current forecasts, it may have the net cash to pay the penalty of Rs752 crore by end of FY22, or else it may have to raise debt,” said the investor note.

UBBL in a stock exchange notice, said it is reviewing the order in consultation with its legal advisors and will evaluate further legal options. Executives of the three beer companies, which together control over 90% of the market, exchanged sensitive information and colluded to fix beer prices since 2005, CCI said in its order.

The antitrust watchdog in its order alleged that the brewers joined hands to discuss their pricing strategies and exchanged cost cards to coordinate their prices and, in turn, avoid price wars.

They also shared their periodical stock and sales data with each other to check that each adhered to the understanding reached among them, besides monitoring their market share in different states, as well as nationally, it claimed.

These brewers also collectively decided upon the strategy to oppose government policies. “In a few cases, for instance, in Odisha, Maharashtra and West Bengal, whenever state governments hiked the excise duty or reduced prices of beer, these firms collectively decided to stop production and supplies in the state,” the CCI order alleged.

UB, in its latest annual report, had said that after the enquiry initiated by CCI in 2018 in relation to allegations of price fixation and cartelisation, the office of the director general, CCI had completed its investigation in November 2019 and had filed its investigation report. UB filed its response and argued during the oral hearings, countering the DG report and subsequently written submissions were filed with the CCI.

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