Presentation On Ub Group February 2008
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Presentation on UB Group February 2008
Table of Contents •
UB Group Overview
•
India Opportunity
•
United Breweries Holdings Limited (“UBHL”)
•
United Spirits Limited (“USL”)
•
United Breweries Limited (“UBL”)
•
Kingfisher Aviation Limited
•
Other Investments
2
UB Group Mantras •
India’s leading branded consumer group
•
Dominate Domestic Market – Accelerated organic growth – Acquisitions
•
Be Globally Significant
•
Set standards of governance and transparency
3
Leadership across categories •
Spirits
•
Volumes – 3rd Largest in the world Market Share – Largest in India with 55% share in value terms 5 brands in top 50 world wide spirits brands* FY 2007 sales – 66 million cases
Breweries Largest in India with 45% market share India’s 1st global consumer brand • Kingfisher
Sold in over 52 countries
•
Aviation Leading operator in Indian skies –market-share about 30% within 29 months of launch 81 aircrafts, 568 daily flights connecting 68 cities Dominant player within 2 yrs of operation
•Impact international edition – Feb 06
4
UB Group – Evolving Strategic Focus
Others 7%
Petrochemical 6%
Paints 7% Engineering 18%
Spirits 29%
FY 1990
Beer 8%
Pharma 25% Airlines 35% Spirits 40%
FY 2007
Beer 10%
Engineering 2% Fertilizers 13%
5
Leadership built on great brands
# No 1 Non Scotch Whiskey in the world
# 6th largest Rum in the world
# No 1 Premium Scotch in India
# Fastest growing whiskey in the world
# Largest Umbrella alcobev brand in the world
# No 1 in the world
# Leading operator in Indian Skies
# No 1 Beer in India
6
Market Capitalization
Market Price & Capitalisation of Key UB Group Companies In USD
Market Price
United United Spirits Ltd Breweries Ltd
United Breweries (Holdings) Ltd
Bombay Stock Exchange SENSEX
July' 2005#
7.9
1.2
5.6
7,635
Jan-06
13.2
2.2
7.6
9,920
Jan-07
23.1
5.3
10.8
14,091
Jan-08
43.2
7.8
22.6
17,649
Investor return over 2 years (Growth %)
444.8
528.9
303.9
131.2
4.3
1.7
1.5
Current Market Cap ( $ Billion)
INR 39.40 = 1 US$
While India’s benchmark index had a growth of 131%, UB Group companies, have been clear OUTPERFORMERS and have provided handsome to its shareholders # July 05 was the month of acquisition of Shawreturns Wallace 7
Group Holding Structure Promoter Group
50.35%
UB (Holdings) Ltd.
55.0%
Investments
Real Estate
Pegasus License
(UB City)
Beer
Spirits 36.9% 100% United Spirits W&M Ltd 75%
12.6%
United Breweries Ltd.
Shaw Wallace Ltd 50%
36.2%
McDowell Holdings Ltd.
Millennium Alcobev
Aviation
Others 10.2%
Aventis PharmaLtd.
78.9%
24.5% Mangalore Chemicals & Fertilizers
Kingfisher Airlines Ltd.
49.77% Deccan Aviation Limited
30.8% UB Engineering
Company
UBHL & KFR
Other Group Cos. Holding
Total Group Holding
USL
36.9%
-
36.9%
UBL
12.62%
24.87%
37.49%
KFA
78.88%
15.10%
93. 98%
Deccan
49. 77%
0.04%
49. 81%
UB Engineering
30.82%
3.91
34.73%
MCF
24.51%
5.94%
30.45%
McDowell H L
36.24%
0.41%
36.65%
Aventis
10.22%
-
10.22%
8
UB Group Management team •
Dr Vijay Mallya, Group Chairman
•
Mr. S R Gupte, Executive Vice Chairman
•
Mr. A K Ravi Nedungadi, President & CFO
•
Mr. V K Rekhi, President - Spirits
•
Mr. Kalyan Ganguly, President - Breweries
•
Mr. S D Lalla, President - Spirits
•
Mr. Deepak Anand, Managing Director (Mangalore Chemicals & Fertilizers Limited)
Dynamic & Professional Management
9
India Opportunity 10
India Opportunity 1411
India GDP US$ Bn BRIC Estimates 929 604 469
2000
Positives • Strong Service Sector • Steady inflation • Strong growth rate • Young population
2005
2010
2015
Concerns • Regulatory Scenario • Oil Prices • Labor reforms • Agriculture Volatility
11
India Opportunity •
India - currently 4th largest economy globally in PP terms
•
Robust economic growth rate expected to continue
•
India entering the Demographic Window (working age group) soon, whereas, Europe, US and China are either well into it or past it
•
1.5 mn new graduates every year; Buoyed growth in IT & ITES and service sector
•
Rapid urbanization – middle class already exceeds 300 million; Working population to raise by 30% by 2013
•
Disposable income to increase at an average of 8.5% p.a. up to 2015
•
Change in lifestyle, higher disposable income, shift in expenditure pattern
•
Spending on non basic discretionary items and personal consumption to grow at 9 10 % p.a.
•
Huge spending on food, drink, entertainment and travel
•
Early entry - 70 % prestige & 50% premium customers b/w 21 -24 yrs
•
Out of population of 1.2 bn, only about 500 Mn are currently of legal drinking age. A sharp increase of about 100 mn in the addressable market size is expected by end of the decade.
12
India Opportunity 2003
2013
181 mn House Holds
213 mn House Holds
3
11
Rich
46
124
Aspires
131
96
Strivers
The shape of demand in India is going to change from a Pyramid to a Diamond •
Alco-beverage industry Impact
•
Fastest growing segments- Premium Vodka 50%, Premium Whisky 30%, Super Premium Whisky 50%, Premium Scotch 75%. 3 yrs back these segments were sluggish
•
Prestige segment growth at >20% compared to <10% in regular segment
•
Direct entry in prestige & above categories – new phenomena
Source: NCAER
13
United Breweries (Holding) Limited 14
UBHL – Holding Company of the UB Group •
Single window to invest in the growing Indian consumer story
•
Owns controlling stakes in market leaders
•
Each of the principal investments is dominant market leader in its space
•
Each investee company is in a fast growing segment catering to current and emerging consumer trends
•
Promoters interest are aligned with UBHL. Single point entry for the promoters
•
Transparent shareholding structure, ultimate economic benefit of the holding in each of the investments flows to UBHL
15
Evolution - UBHL •
UBHL has become the market leader in each core business it has ventured into Announced merger of KFA with Deccan,; Acquired further 3% stake in Deccan Aviation to increase the holding to 50%
Rs
12 0 0
900
600
2001: Bought Hebert son
2001: Bought Gilbert Green Label
2000: Brought in Scottish New Castle
300
# 1 Spirits in India 2005: Market gave thumps up as Margins doubled to 18% because of synergies
# 1 Beer in India
Kept acquiring smaller players in beer and liquor industry. BUILT BRANDS LIKE KINGFISHER, BAGBIPER, BLACK DOG …
2005: Consolidated Beer business under UBL and liquor business under USL
Acquired further 20% stake in Deccan Aviation through open offer # 1 Airline in India
2007: Acquired 26% in Deccan Aviation-
2004: Bought Shaw Wallace
0
Close Price 16
UBHL - Valuations
Assets Quoted Investments United Spirits United Breweries Aventis Pharma Deccan Aviation Mangalore Chemical UB Engineering Mcdowell Holdings Limited Unquoted Investments KFA# Real Estate
Equity Stake of UBHL
Book Value (INR mio)
36.9% 12.6% 10.2% 49.8% 24.5% 30.8% 36.2%
1,123 629 4,270 11,109 335 104 149
78.9% 55.0%
3,978 -
Total Debt Net Invetment Value
21,761
Mcap (INR mio) 197,109 71,294 26,784 37,525 5,333 4,511 4,444 347,000
Value of Stake (INR mio) 72,792 8,983 2,737 18,676 1,307 1,390 1,610 15,917 5,000 128,413 12,582 115,831
# [Grant Thornton Valuation] Valuation as of 31th January 2008 (1 USD = INR 39.4) Cash & Cash equivalents as of Dec 31 2007 is 1901.9 Mio
17
UBHL – Pre and post QIP/Warrants Debt Position Receipts of Issue QIP
Receipts 6,000
Warrants Issue
7,200
Total receipts
13,200
Debt Position Term Loan Short Term Loan Working capital Loan Other Debts
Total loan liabilities
Pre Issue 13,210 3,190
Post Issue 6,550 -
73
73
7
7
16,480
6,630
INR in mio
18
United Spirits Limited 19
USL Overview • • • • • • • •
World’s No.3 distiller 15 Millionaire brands McDowell’s No. 1 Brandy – world’s largest selling brandy McDowell’s No. 1 Whisky – world’s fastest growing whisky Bagpiper Whisky - largest selling whisky in world Pan-Indian presence - largest manufacturing/distribution set up Leadership across flavors, geographies and price points Export unit targeting Indian communities living abroad
33 years years ago ago • • • • • • •
Multiple legal entities Primarily volume focus Growth driven by market share across segments “Spirits” player Focus on India Focus on annual performance EBDITA 8.50%
Now Now • • • • • • •
One legal entity Primarily top-line and profitability focus Growth driven by increased “premium-ness” of the portfolio Integrated player across spirits and wines Global ambitions – pragmatically calibrated In addition to annual performance, accountability for 3 year strategic plan EBDITA 22%
20
USL Acquisitions and resultant market share • •
UB group consolidated its spirits business by bringing the business of McDowell & Co, Herbertsons, Shaw Wallace & Triumph Distillers into USL fold Key Acquisitions: – – –
June 2005 – UB Group acquired majority stake in Shaw Wallace & Co July 2005 – USL acquired Bouvet Ladubay a leading manufacturer of sparkling wine in France May 2007 – USL acquired 100% stake in Whyte & Mackay worlds fourth largest Scotch Whisky company. This will give USL access to the key overseas markets and access to “scotch” inventory
USL 31%
Others 58%
Radico Khaitan 8%
USL 39%
USL 44% Others 33%
SWC 11% Others 53%
Market Scenario – 2005 (Before Acquisition)
Radico Khaitan 8%
SWC 12%
Market Scenario – 2007 (Post Acquisition)
USL 59%
Others 44%
Market Scenario top line Market Scenario top line brands – 2005 (Before brands – 2007 (After Acquisition) Acquisition)
21
W&M Acquisition • • •
Acquired by USL in May 2007 Fourth largest Scotch whisky company in the world, with over 150 years of heritage and strong brands Acquisition provides a strong platform: – –
• • •
to exploit rapidly growing India opportunity for Scotch, especially at the premium end W&M brand pedigree to drive market share in high growth emerging markets
Provides a sustainable source for bulk scotch which is used for blending in USL’s IMFL offerings W&M is a valuable asset in a ‘Scotch-short’ market environment - expected to last for at least a decade Indian whisky (manufactured and consumed predominantly in India) constitutes 19% of total global whisky volumes with increasing demand for the premium segment
22
USL – Trend of Sales vs. Revenue YoY growth in volume, revenues Particulars
Volume growth
Revenue growth
66.4
70
Volume/Sales growth after acquisition
60 50
40.1
40
38,790
21,250
30
Before acquisition (1997-05)
14%
After acquisition (2005-07)
30%
20%
20
14.8
10 0
4,030 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
•
36%
Compounded annual growth rates of sales revenue growing at a faster rate than the CAGR of sales volume.
USL Sales (mio cases)
USL Sales (INR mio)
6000 4910 5000 4000
Post acquisition EBITDA growth 2580
3000
•
USL moving up the value chain by reducing market share in the “cheap liquor” market.
2000 1460 920
1000 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1US$ = 39.40 INR
USL EBITDA (INR mio)
23
Snapshot of Financials INR in Mio
Dec 2007*
FY 2007
FY 2006
Net Income
24,259
27,909
20,968
Cost of Goods Sold Staff Costs Advtg & Sales Promotion Other Overheads E BIDTA
12,131 1,677 2,185 3,129 5,137
14,454 1,808 3,124 3,557 4,966
10,769 1,665 2,561 3,385 2,587
Interest / Finance cost
948
1,068
1,666
Depreciation
232
309
409
Other Income
Exceptional Income
2,627
Profit before Tax
3,958
6,216
512
Income Tax
1,398
1,276
92
Profit after Tax
2,560
4,940
420
•Standalone for 9 months 1US$ = 39.40 INR
24
Sustained EBITDA Growth
McD
J une'0 4
2 0 2 .6
J une'0 5
3 56 .9
76 %
Sep '0 4
19 6 .3
Sep '0 5
3 6 7.4
8 7%
Dec'0 4
2 4 5.0
Dec'0 5
511.9
10 9 %
M ar'0 5
2 53 .0
M ar'0 6
4 9 2 .7
9 5%
J une'0 5
3 56 .9
J une'0 6
774 .7
117%
Sep t'0 5
1,2 2 1.7
Sep t'0 6
2 ,3 9 4 .1
96%
Dec'0 5
2 ,0 4 7.4
Dec'0 6
3 ,8 10 .8
86%
M ar'0 6
2 ,58 7.5
M ar'0 7
4 ,9 13 .8
90%
J un'0 6
1,0 4 4 .9
J un'0 7
1,74 2 .3
6 7%
Sep t'0 6
2 ,3 9 4 .1
Sep t '0 7
3 ,3 3 3 .5
39%
Dec'0 6
3 ,9 79 .4
Dec'0 7
5,6 16 .3
4 1%
USL
25
USL Debt Position – December 2007 Term Loans
6,059
Whyte & Mackay acquisition Loan- With recourse to USL - Without recourse Working Capital Loans Fixed Deposits
24,450* 25,480 5,290 513
Unsecured Loans (incl FCCB's) USL Shaw wallace
844 955 63,591
Less: Cash & Cash Equivalent
3,723
Net Debt
59,868
* Value of treasury stock is Rs. 23,715 mio
1US$ = 39.40 INR
26
New initiatives •
India’s largest winery is being built at Baramati - to be operational by October’08. Cost of the project – Rs.230 million, over a three year period.
•
Brand ZINZI to be launched in Q1 calendar year 2008 in Mumbai, will be launched in other cities during 2008.
•
Bouvet Ladubay brands launched in Mumbai between the price points Rs1500/- and Rs 2200/-. product launch in Delhi and Bangalore in Q3 FY 2008.
•
Four Seasons range of premium brands to be launched from March’08
•
Dalmore, single malt whisky, launched during November 2007 in Mumbai, Bangalore and Pune.
27
United Breweries Limited 28
Alcohol Consumption trends <0.5% Wine
5% Emerging Markets
India
Spirits/ 78% Liquor 8%
Beer is under represented in India
21.5% Beer 87% 83
23
24
China
World Avg
12 1 India
Indonesia
USA
Major milestone of 1 Liter Consumption achieved in India but….
29
Industry Growth 30% 25% 20% 15% 10% 5%
5 Year CAGR 2005
2006
2007
Future Strong with double digit growth expected 30
UBL – Trend of Market Share •
UBL is the largest beer company in India and controls ~60% of all manufacturing capacity Market share
•
– – –
UBL has been the market leader with close competition and marginal leadership during 1997–2002 largely due to multiplicity of players and fragmented markets 2002 onwards, UBL embarked on strategy of inorganic growth through aggressive acquisitions. This helped increase overall sales & increased market share Early 2005, UBL entered into a JV with Scottish & New Castle Group
UBL 37% Others 46%
Mokan Meakin 17%
Market Scenario – 1997 (Before Acquisition)
Shaw wallace 25%
UBL 40%
Others 23% UBL 46%
Others 35% SAB 31%
Market Scenario – 2002 (Year of Acquisition)
Market Scenario – 2007
31
UBL –Trend of Sales: Volume Vs Revenue •
UBL has been growing faster than market
UBL - Performance 24 5000
Strong: Premium: Industry Growth 8.0% Industry Growth 23.4% UBL 14.9% UBL 8%* 16.7
268
567
2310 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 UBL Sales (mio cases)
18.6m
18.7m
17.7m
UBL Sales (INR mio)
23.0m
Acquired Breweries - Performance
18 26 2002
Dec 06
26.8
2003
2004
2005
2006
5670
2007
06 Dec 07 Dec Acq. 07 brands Sales Dec (Lakh cases) Acq. brands Sales (Rs.in crs)
•
YoY (6 years) in sales volume and revenue growth in acquired breweries (Post acquisition) – 100% pa & 124% pa respectively
1.8 260 2002
2003
2004
2005
2006
2007
Acq. brands Sales (mio cases) Note: Year ending 31st March
Acq. brands Sales (INR mio)
* 9 months
32
Snapshot of Financials INR in mio
•
KF Strong and KF premium outgrow the industry
Dec 2007*
•
New greenfield breweries commissioned and in operation Capacity investment for 2008-09 on track
FY 2006
Total Revenue
9,761
10,749
7,058
Cost of goods sold
4,954
5,310
3,040
561
642
450
Marketing and Selling expenses
2,340
2,508
1,569
Other overheads EBITDA
511 1,394
674 1,615
627 1,372
Interest
283
280
239
Depreciation
425
385
209
Staff costs
•
FY 2007
Other Income
(305)
Non recurring Expenditure PBT Income tax PAT
686
950
619
(257)
(299)
(425)
429
651
194
•Standalone for 9 months 1US$ = 39.40 INR
33
UBL – Debt Position December 2007 INR in mio Term Loans * Unsecured Loans
2,610 505
Working Capital Loans
1,031
Total Liabilities
4,146
Less: Cash & Cash Equivalent Net Debt
192 3,954
Debt / Equity^
1.27
Debt / EBITDA^
1.76
Blended Cost of Debt (%)
9.50%
^ Annualized
* Term Loans includes INR 863 mio utilized for acquisition of subsidiary and INR 1,225 mio for Capex
34
New Initiatives •
Marketing – Launch “KF Ultra” in Super Premium Category – Launch “Buzz” to widen consumer base – Innovation in Packaging : •
–
Contemporary Dressing, New Design Bottles, New Range of SKU’s
Innovation in 3600 Brand presence : • •
Launch of the NDTV Good Times channel Experiential Marketing
•
Manufacturing – First 25,000 BPH line in India at UB Rajasthan – 36,000 BPH line being installed at UB Bombay – New Products being developed in-house at CTC – Innovative Brewing Technology Development in process
•
Capital Raising –
To fund capex planned to meet robust growth expectations, a rights issue of about Rs. 4,250 million underway.
35
Kingfisher Airlines Limited 36
Air travel potential in India •
Domestic Traffic (pax) : 20 M in 05 – 25 M in 06 – 35 M in 07
•
Growth potential for domestic air travel linked to the surge of the Indian middle class –
•
Significant tourism growth perspectives – – –
•
4 M foreign annual visitors Tourism Ministry targets 10 M tourists by 2010 World Tourism Organisation forecasts 25 M tourists by 2015
Forecasted Growth in the number of passengers (IATA) – –
•
Bracket of population evolving as a young, consumerist and urban generation bound to make an ever-greater use of air transport
Domestic : 20.4% p.a. in average from 2007 to 2010 International : 7.3% p.a. in average during the same period
Wealth is no longer confined to metro cities but widely dispersed in under served secondary cities. Huge potential to start new routes and attract business from higherincome groups.
37
Evolving market place •
India fleet of 320 aircraft compared to China 1,120 planes for a similar population size
•
20 M Indians travel by train in one day, against 35 M by air in one year
•
Market liberalization initiatives : lower taxation (Air Travel tax, Airline Turbine Fuel tax, landing fees…), gradual open skies, signature of expanded bilateral agreements, incentives for privatization & investments in airlines
•
Airport infrastructures are improving. Private sector building new airports in South India which is the KFA/Deccan focus area
•
Indian airlines only carry 32% of international passengers to & from India
•
Mumbai/ Delhi and other major airports being decongested
38
UB Group and Aviation •
UB Group, having achieved dominance in its core beverage business, was looking to leverage its unique strengths in – – – –
Understanding the needs of the evolving Indian consumer Creating premium products at true value Operating in a highly regulated environment Leveraging brand equity
•
Aviation offers extra ordinary growth potential
•
Success based on three core strengths – – –
•
Ability to tightly manage costs Ability to manage scale up Ability to deliver a unique experience while remaining competitive
With the acquisition of Air Deccan, UB now caters to the entire spectrum of air travelers
39
Management Advisory Board •
•
Kingfisher’s Advisory Board has the who’s who of the international aviation industry – –
Sir Ralph Robins
- Former Chairman of Rolls-Royce
–
Sir Colin Terry
- Former Chief Engineer and Head of Logistics – Royal Air Force
–
Mr. Stewart John, OBE
- Former Head of Engineering Cathay Pacific Airways
–
Mr. H Lr Karel H Ledeboer - Former CEO of KLM Royal Du Airlines and COO – Swiss Airlines
–
Mr. David Turnbull
- Former Chairman of Swire Pacific Ltd and Cathay Pacific Airways
Kingfisher will be greatly benefited from the immense knowledge of this team of Advisory Board members
40
Milestones •
KFA + Deccan Aviation Limited (DAL) achieved a market share of about 30% within 27 months of operations as compared to Jet Airways (Jet + Jet lite) market share of about 30% - 14 years after launch
•
KFA + DAL second largest domestic airline group with a fleet of 75 aircrafts. Quickly ramped up the same in 27 months as compared to Jet’s fleet size of 76 aircrafts for domestic operations (as of July 2007)
•
Over 5600 flights operated within 27 months of launch
•
Flown –
1 million guests in 10 months
–
2 million guests in 15 months
–
3 million guests in 19 months
–
4 million guests in 22 months
•
KFA connects 31 cities and DAL 66 cities. Combined Coverage 72 cities
•
Inducted an average of more than 1 aircraft per month which is amongst the highest induction rates in the world
41
Market Share – KFA Leading operator 45%
40% 35%
30% 25%
20%
15% 10%
5% 0% May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- Jun- Sep- Nov05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07
-5% Kingfisher
Jet
Sahara
Indian
Go
Paramount
Indigo
Indus
Deccan
Spice
Note: 1. Jet and Sahara Markets shares consolidated from Jan 07 2. KFA and DAL market shares consolidated from May 07
42
Fleet plan • •
Current fleet: 24 A320F +1 Corporate jet + 15 ATR (December 2007) Fleet Plan of over 150 aircraft
Average Number of Aircraft per Fiscal Year 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
ATR
A320F
WB
FY FY FY FY FY FY FY FY FY FY FY FY FY FY 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 A uA
•
Deliveries well spread until FY18/19 and commensurate with expected growth in demand for air travel
43
International Strategy •
Current Government policy requiring 5 years of domestic operations prior to flying overseas likely to be reduced.
•
Deccan will be completing 5 years of operations by middle of 2008. KFA can fly international even in the event of the policy remaining unchanged.
•
India – US – India nonstop flights present the most unique opportunity and reduced competition. KFA will concentrate mainly on this opportunity and has ordered specific aircraft types to undertake this mission.
•
KFA will commence nonstop flights with the Airbus A340 -500 between Bangalore and San Francisco and Bombay and New York in Q2 2008.
•
KFA will commence nonstop flights with the Airbus A330 - 200 between Bombay and London and Bombay and Hong Kong in Q2 2008.
44
Significant Awards •
Winner of the “Best New Airline of Year” Award for 2005 in the Asia-Pacific & Middle East region from Centre for Asia Pacific Aviation (CAPA)
•
Winner of the world-renowned SKYTRAX Award for Service Excellence 200506
•
Winner of the PATWA award for Service and Cuisine
•
Rated as the 3rd most successful brand launch of 2005 by Business Standard – India’s leading business daily
•
Voted as the most preferred airline in a survey conducted by an independent research firm with 46% votes compared to 9Ws 23%
•
Ranked amongst the Top Ten Buzziest Brands of 2005 by agencyfaqs.com and The Brand Reporter
•
No. 1 in corporate category – even ahead of groups like Tata, Reliance
•
Ranked among the top 5 online advertisers by Yahoo India
•
Ranked among the most effective advertisers of ’05- ‘06 by NDTV Profit ,a leading business news channel
45
Performance Indicators – December -07 No of Flights per day - KFA 248 No of Stations Covered - KFA 43 Current Average Ticket Value (USD) First KF Class Combined
$ $ $
330 109 118
Current Average Loads First KF Class
40% 68% 66% 14% 16% 29%
Total Market Share - KFA Deccan Combined Audited FY'06 Particulars Total Revenue Total Operating Costs E B ITDA R Lease Rentals Interest Cash from Operations Depreciation Profit / (Loss) Synergy Benefits from Air Deccan Acquisition Revised Profit / (Loss) Revised Cash from Operations
136 161 (25) 28 4 (58) 1 (58) (58) (58)
Audited FY'07 USD Million 396 437 (41) 69 22 (133) 12 (145)
(133)
Projected FY'08 735 631 104 122 27 (45) 18 (63) 25 (38) (20)
46
Kingfisher – Deccan deal highlights •
49.8% was acquired in Deccan Aviation for about USD 287 million
•
Kingfisher-Air Deccan group is the largest domestic airline group with a current fleet of 81 aircrafts
•
Combined network covering 68 cities is a unique and not easily replicated strength. The reach is larger than Air India, the Govt. owned carrier.
•
The combined airline powerhouse will henceforth work closely to exploit the significant synergies that exist in the areas of operations and maintenance, ground handling, vastly increased connectivity, feeder services ,distribution penetration, etc
•
Both airlines put together offer 568 daily flights connecting 68 cities whilst taking advantage of unparalleled synergy benefits arising from common fleet and enjoy the largest market share of 30% in the Indian aviation industry
•
The deal has provided an opportunity for both the airlines to review their aircraft orders and other capex items like simulators, etc – Significant capex savings
•
Significant operational synergies are expected are expected from this deal for both the airlines
•
Intent to raise capital to take care of the funding requirements of the airline business
47
KFA Deccan – Synergy opportunities •
The two airlines together provide scale which could be the basis of creating a more competitive business – potential no.1 in the domestic aviation industry – Maximum number of departures/day – Largest network of destinations
•
Assets and infrastructure have a strong strategic fit – Similar aircraft type (Airbus/ATR) – Significant increase in airport slots
•
Potential to realize significant revenue, cost and capital synergies
48
KFA Deccan – Synergy opportunities While maintaining respective FSC and LCC focus, two airlines can: • Create a network strategy which provides the combine a competitive advantage • Re-calibrate capacity deployment to facilitate optimal utilization of capital • Use each other’s strength to further the combines sales and marketing prowess • Reduce costs to strengthen respective market positions
49
KFA Deccan – Operating structure Combined functional structure presents best opportunity to facilitate speedy realization of synergies Rationale •
Singular responsibility/accountability is necessary to achieve synergies which are present across all functions –
Separate structure till-date has not been conducive to realization of synergies
–
In a merger situation, critical mass of people should be made responsible for both the businesses
•
Unique KF/DN context would ensure –
Appropriate distinctions between KF and DN would remain – Aircraft configuration, cabin costs, channel focus
– •
Difference in costs of two brands would remain intact
Functional structure would be designed to ensure that respective nuances of each airline are protected as appropriate
50
KFA Deccan – Proposed legal structure & next steps Single share denomination’ for entire value of two airlines presents best opportunity to maximize business opportunity and synergy realization Rationale •
Full synergy realization not possible with separate legal structure
•
Allows development of a “flexible” business – source of competitive advantage
•
Covers all customer segments in the market which captures both profitability and growth opportunity
•
Creates scale – potential no.1 in the domestic aviation industry
• • •
Positions business as an attractive alliance partner, if necessary Obtain board approval on ‘business direction’ Align operating management and prepare the combined business for implementation of synergy opportunities
51
Other businesses / investments UB Engineering • •
UBHL holds 34.74% of UB Engineering One of the foremost Indian engineering companies in the field of installation of industrial plants Focus on projects in Power, Fertilizers, Oil & Gas, Fire Fighting, Effluent Treatment, Agrotech and other sectors Recently awarded ISO 9001:2000 Certification for its operations covering Installation, Erection, Commissioning, Testing and Maintenance Turnover of over US$ 70 mnin 2006-07
•
•
•
Real Estate • • •
•
•
Mangalore Chemicals & Fertilizer •
•
• •
UB Group took over MCF - a "potentially sick " unit with accumulated losses in excess of US14 mn Manufacturing capacity including 2,17,800 MT of Ammonia and 3,80,000 MT of Urea Brands- Mangala Urea and DAP Manufacturing capacity including 2,17,800 MT of Ammonia and 3,80,000 MT of Urea Co. achieved a turnover of US$ 150 mn
Owns ~500,000 sqft of prime property at Bangalore Prorject competed - UB CITY will house the Group offices under one roof It will also house commercial offices, banks, high-end retail stores, 1 five star hotel, serviced apartments, restaurants, food courts, pubs, health clubs, cafes etc Current market value of property is ~ US$ 125 mn as against a holding cost of US$ 40 mn Rental income estimated at ~ US$ 5.5 mn p.a
Aventis • • •
•
UBHL holds 10.28% of Aventis Established in 1987: Vittal Mallya Scientific Research Foundation (VMSRF) Recognized by the Departments of Scientific & Industrial Research (DSIR), Dept. of Biotechnology (DBT) Several patents to its credit
52
Table of Contents •
UB Group Overview
•
India Opportunity
•
United Breweries Holdings Limited (“UBHL”)
•
United Spirits Limited (“USL”)
•
United Breweries Limited (“UBL”)
•
Kingfisher Aviation Limited
•
Other Investments
2
UB Group Mantras •
India’s leading branded consumer group
•
Dominate Domestic Market – Accelerated organic growth – Acquisitions
•
Be Globally Significant
•
Set standards of governance and transparency
3
Leadership across categories •
Spirits
•
Volumes – 3rd Largest in the world Market Share – Largest in India with 55% share in value terms 5 brands in top 50 world wide spirits brands* FY 2007 sales – 66 million cases
Breweries Largest in India with 45% market share India’s 1st global consumer brand • Kingfisher
Sold in over 52 countries
•
Aviation Leading operator in Indian skies –market-share about 30% within 29 months of launch 81 aircrafts, 568 daily flights connecting 68 cities Dominant player within 2 yrs of operation
•Impact international edition – Feb 06
4
UB Group – Evolving Strategic Focus
Others 7%
Petrochemical 6%
Paints 7% Engineering 18%
Spirits 29%
FY 1990
Beer 8%
Pharma 25% Airlines 35% Spirits 40%
FY 2007
Beer 10%
Engineering 2% Fertilizers 13%
5
Leadership built on great brands
# No 1 Non Scotch Whiskey in the world
# 6th largest Rum in the world
# No 1 Premium Scotch in India
# Fastest growing whiskey in the world
# Largest Umbrella alcobev brand in the world
# No 1 in the world
# Leading operator in Indian Skies
# No 1 Beer in India
6
Market Capitalization
Market Price & Capitalisation of Key UB Group Companies In USD
Market Price
United United Spirits Ltd Breweries Ltd
United Breweries (Holdings) Ltd
Bombay Stock Exchange SENSEX
July' 2005#
7.9
1.2
5.6
7,635
Jan-06
13.2
2.2
7.6
9,920
Jan-07
23.1
5.3
10.8
14,091
Jan-08
43.2
7.8
22.6
17,649
Investor return over 2 years (Growth %)
444.8
528.9
303.9
131.2
4.3
1.7
1.5
Current Market Cap ( $ Billion)
INR 39.40 = 1 US$
While India’s benchmark index had a growth of 131%, UB Group companies, have been clear OUTPERFORMERS and have provided handsome to its shareholders # July 05 was the month of acquisition of Shawreturns Wallace 7
Group Holding Structure Promoter Group
50.35%
UB (Holdings) Ltd.
55.0%
Investments
Real Estate
Pegasus License
(UB City)
Beer
Spirits 36.9% 100% United Spirits W&M Ltd 75%
12.6%
United Breweries Ltd.
Shaw Wallace Ltd 50%
36.2%
McDowell Holdings Ltd.
Millennium Alcobev
Aviation
Others 10.2%
Aventis PharmaLtd.
78.9%
24.5% Mangalore Chemicals & Fertilizers
Kingfisher Airlines Ltd.
49.77% Deccan Aviation Limited
30.8% UB Engineering
Company
UBHL & KFR
Other Group Cos. Holding
Total Group Holding
USL
36.9%
-
36.9%
UBL
12.62%
24.87%
37.49%
KFA
78.88%
15.10%
93. 98%
Deccan
49. 77%
0.04%
49. 81%
UB Engineering
30.82%
3.91
34.73%
MCF
24.51%
5.94%
30.45%
McDowell H L
36.24%
0.41%
36.65%
Aventis
10.22%
-
10.22%
8
UB Group Management team •
Dr Vijay Mallya, Group Chairman
•
Mr. S R Gupte, Executive Vice Chairman
•
Mr. A K Ravi Nedungadi, President & CFO
•
Mr. V K Rekhi, President - Spirits
•
Mr. Kalyan Ganguly, President - Breweries
•
Mr. S D Lalla, President - Spirits
•
Mr. Deepak Anand, Managing Director (Mangalore Chemicals & Fertilizers Limited)
Dynamic & Professional Management
9
India Opportunity 10
India Opportunity 1411
India GDP US$ Bn BRIC Estimates 929 604 469
2000
Positives • Strong Service Sector • Steady inflation • Strong growth rate • Young population
2005
2010
2015
Concerns • Regulatory Scenario • Oil Prices • Labor reforms • Agriculture Volatility
11
India Opportunity •
India - currently 4th largest economy globally in PP terms
•
Robust economic growth rate expected to continue
•
India entering the Demographic Window (working age group) soon, whereas, Europe, US and China are either well into it or past it
•
1.5 mn new graduates every year; Buoyed growth in IT & ITES and service sector
•
Rapid urbanization – middle class already exceeds 300 million; Working population to raise by 30% by 2013
•
Disposable income to increase at an average of 8.5% p.a. up to 2015
•
Change in lifestyle, higher disposable income, shift in expenditure pattern
•
Spending on non basic discretionary items and personal consumption to grow at 9 10 % p.a.
•
Huge spending on food, drink, entertainment and travel
•
Early entry - 70 % prestige & 50% premium customers b/w 21 -24 yrs
•
Out of population of 1.2 bn, only about 500 Mn are currently of legal drinking age. A sharp increase of about 100 mn in the addressable market size is expected by end of the decade.
12
India Opportunity 2003
2013
181 mn House Holds
213 mn House Holds
3
11
Rich
46
124
Aspires
131
96
Strivers
The shape of demand in India is going to change from a Pyramid to a Diamond •
Alco-beverage industry Impact
•
Fastest growing segments- Premium Vodka 50%, Premium Whisky 30%, Super Premium Whisky 50%, Premium Scotch 75%. 3 yrs back these segments were sluggish
•
Prestige segment growth at >20% compared to <10% in regular segment
•
Direct entry in prestige & above categories – new phenomena
Source: NCAER
13
United Breweries (Holding) Limited 14
UBHL – Holding Company of the UB Group •
Single window to invest in the growing Indian consumer story
•
Owns controlling stakes in market leaders
•
Each of the principal investments is dominant market leader in its space
•
Each investee company is in a fast growing segment catering to current and emerging consumer trends
•
Promoters interest are aligned with UBHL. Single point entry for the promoters
•
Transparent shareholding structure, ultimate economic benefit of the holding in each of the investments flows to UBHL
15
Evolution - UBHL •
UBHL has become the market leader in each core business it has ventured into Announced merger of KFA with Deccan,; Acquired further 3% stake in Deccan Aviation to increase the holding to 50%
Rs
12 0 0
900
600
2001: Bought Hebert son
2001: Bought Gilbert Green Label
2000: Brought in Scottish New Castle
300
# 1 Spirits in India 2005: Market gave thumps up as Margins doubled to 18% because of synergies
# 1 Beer in India
Kept acquiring smaller players in beer and liquor industry. BUILT BRANDS LIKE KINGFISHER, BAGBIPER, BLACK DOG …
2005: Consolidated Beer business under UBL and liquor business under USL
Acquired further 20% stake in Deccan Aviation through open offer # 1 Airline in India
2007: Acquired 26% in Deccan Aviation-
2004: Bought Shaw Wallace
0
Close Price 16
UBHL - Valuations
Assets Quoted Investments United Spirits United Breweries Aventis Pharma Deccan Aviation Mangalore Chemical UB Engineering Mcdowell Holdings Limited Unquoted Investments KFA# Real Estate
Equity Stake of UBHL
Book Value (INR mio)
36.9% 12.6% 10.2% 49.8% 24.5% 30.8% 36.2%
1,123 629 4,270 11,109 335 104 149
78.9% 55.0%
3,978 -
Total Debt Net Invetment Value
21,761
Mcap (INR mio) 197,109 71,294 26,784 37,525 5,333 4,511 4,444 347,000
Value of Stake (INR mio) 72,792 8,983 2,737 18,676 1,307 1,390 1,610 15,917 5,000 128,413 12,582 115,831
# [Grant Thornton Valuation] Valuation as of 31th January 2008 (1 USD = INR 39.4) Cash & Cash equivalents as of Dec 31 2007 is 1901.9 Mio
17
UBHL – Pre and post QIP/Warrants Debt Position Receipts of Issue QIP
Receipts 6,000
Warrants Issue
7,200
Total receipts
13,200
Debt Position Term Loan Short Term Loan Working capital Loan Other Debts
Total loan liabilities
Pre Issue 13,210 3,190
Post Issue 6,550 -
73
73
7
7
16,480
6,630
INR in mio
18
United Spirits Limited 19
USL Overview • • • • • • • •
World’s No.3 distiller 15 Millionaire brands McDowell’s No. 1 Brandy – world’s largest selling brandy McDowell’s No. 1 Whisky – world’s fastest growing whisky Bagpiper Whisky - largest selling whisky in world Pan-Indian presence - largest manufacturing/distribution set up Leadership across flavors, geographies and price points Export unit targeting Indian communities living abroad
33 years years ago ago • • • • • • •
Multiple legal entities Primarily volume focus Growth driven by market share across segments “Spirits” player Focus on India Focus on annual performance EBDITA 8.50%
Now Now • • • • • • •
One legal entity Primarily top-line and profitability focus Growth driven by increased “premium-ness” of the portfolio Integrated player across spirits and wines Global ambitions – pragmatically calibrated In addition to annual performance, accountability for 3 year strategic plan EBDITA 22%
20
USL Acquisitions and resultant market share • •
UB group consolidated its spirits business by bringing the business of McDowell & Co, Herbertsons, Shaw Wallace & Triumph Distillers into USL fold Key Acquisitions: – – –
June 2005 – UB Group acquired majority stake in Shaw Wallace & Co July 2005 – USL acquired Bouvet Ladubay a leading manufacturer of sparkling wine in France May 2007 – USL acquired 100% stake in Whyte & Mackay worlds fourth largest Scotch Whisky company. This will give USL access to the key overseas markets and access to “scotch” inventory
USL 31%
Others 58%
Radico Khaitan 8%
USL 39%
USL 44% Others 33%
SWC 11% Others 53%
Market Scenario – 2005 (Before Acquisition)
Radico Khaitan 8%
SWC 12%
Market Scenario – 2007 (Post Acquisition)
USL 59%
Others 44%
Market Scenario top line Market Scenario top line brands – 2005 (Before brands – 2007 (After Acquisition) Acquisition)
21
W&M Acquisition • • •
Acquired by USL in May 2007 Fourth largest Scotch whisky company in the world, with over 150 years of heritage and strong brands Acquisition provides a strong platform: – –
• • •
to exploit rapidly growing India opportunity for Scotch, especially at the premium end W&M brand pedigree to drive market share in high growth emerging markets
Provides a sustainable source for bulk scotch which is used for blending in USL’s IMFL offerings W&M is a valuable asset in a ‘Scotch-short’ market environment - expected to last for at least a decade Indian whisky (manufactured and consumed predominantly in India) constitutes 19% of total global whisky volumes with increasing demand for the premium segment
22
USL – Trend of Sales vs. Revenue YoY growth in volume, revenues Particulars
Volume growth
Revenue growth
66.4
70
Volume/Sales growth after acquisition
60 50
40.1
40
38,790
21,250
30
Before acquisition (1997-05)
14%
After acquisition (2005-07)
30%
20%
20
14.8
10 0
4,030 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
•
36%
Compounded annual growth rates of sales revenue growing at a faster rate than the CAGR of sales volume.
USL Sales (mio cases)
USL Sales (INR mio)
6000 4910 5000 4000
Post acquisition EBITDA growth 2580
3000
•
USL moving up the value chain by reducing market share in the “cheap liquor” market.
2000 1460 920
1000 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1US$ = 39.40 INR
USL EBITDA (INR mio)
23
Snapshot of Financials INR in Mio
Dec 2007*
FY 2007
FY 2006
Net Income
24,259
27,909
20,968
Cost of Goods Sold Staff Costs Advtg & Sales Promotion Other Overheads E BIDTA
12,131 1,677 2,185 3,129 5,137
14,454 1,808 3,124 3,557 4,966
10,769 1,665 2,561 3,385 2,587
Interest / Finance cost
948
1,068
1,666
Depreciation
232
309
409
Other Income
Exceptional Income
2,627
Profit before Tax
3,958
6,216
512
Income Tax
1,398
1,276
92
Profit after Tax
2,560
4,940
420
•Standalone for 9 months 1US$ = 39.40 INR
24
Sustained EBITDA Growth
McD
J une'0 4
2 0 2 .6
J une'0 5
3 56 .9
76 %
Sep '0 4
19 6 .3
Sep '0 5
3 6 7.4
8 7%
Dec'0 4
2 4 5.0
Dec'0 5
511.9
10 9 %
M ar'0 5
2 53 .0
M ar'0 6
4 9 2 .7
9 5%
J une'0 5
3 56 .9
J une'0 6
774 .7
117%
Sep t'0 5
1,2 2 1.7
Sep t'0 6
2 ,3 9 4 .1
96%
Dec'0 5
2 ,0 4 7.4
Dec'0 6
3 ,8 10 .8
86%
M ar'0 6
2 ,58 7.5
M ar'0 7
4 ,9 13 .8
90%
J un'0 6
1,0 4 4 .9
J un'0 7
1,74 2 .3
6 7%
Sep t'0 6
2 ,3 9 4 .1
Sep t '0 7
3 ,3 3 3 .5
39%
Dec'0 6
3 ,9 79 .4
Dec'0 7
5,6 16 .3
4 1%
USL
25
USL Debt Position – December 2007 Term Loans
6,059
Whyte & Mackay acquisition Loan- With recourse to USL - Without recourse Working Capital Loans Fixed Deposits
24,450* 25,480 5,290 513
Unsecured Loans (incl FCCB's) USL Shaw wallace
844 955 63,591
Less: Cash & Cash Equivalent
3,723
Net Debt
59,868
* Value of treasury stock is Rs. 23,715 mio
1US$ = 39.40 INR
26
New initiatives •
India’s largest winery is being built at Baramati - to be operational by October’08. Cost of the project – Rs.230 million, over a three year period.
•
Brand ZINZI to be launched in Q1 calendar year 2008 in Mumbai, will be launched in other cities during 2008.
•
Bouvet Ladubay brands launched in Mumbai between the price points Rs1500/- and Rs 2200/-. product launch in Delhi and Bangalore in Q3 FY 2008.
•
Four Seasons range of premium brands to be launched from March’08
•
Dalmore, single malt whisky, launched during November 2007 in Mumbai, Bangalore and Pune.
27
United Breweries Limited 28
Alcohol Consumption trends <0.5% Wine
5% Emerging Markets
India
Spirits/ 78% Liquor 8%
Beer is under represented in India
21.5% Beer 87% 83
23
24
China
World Avg
12 1 India
Indonesia
USA
Major milestone of 1 Liter Consumption achieved in India but….
29
Industry Growth 30% 25% 20% 15% 10% 5%
5 Year CAGR 2005
2006
2007
Future Strong with double digit growth expected 30
UBL – Trend of Market Share •
UBL is the largest beer company in India and controls ~60% of all manufacturing capacity Market share
•
– – –
UBL has been the market leader with close competition and marginal leadership during 1997–2002 largely due to multiplicity of players and fragmented markets 2002 onwards, UBL embarked on strategy of inorganic growth through aggressive acquisitions. This helped increase overall sales & increased market share Early 2005, UBL entered into a JV with Scottish & New Castle Group
UBL 37% Others 46%
Mokan Meakin 17%
Market Scenario – 1997 (Before Acquisition)
Shaw wallace 25%
UBL 40%
Others 23% UBL 46%
Others 35% SAB 31%
Market Scenario – 2002 (Year of Acquisition)
Market Scenario – 2007
31
UBL –Trend of Sales: Volume Vs Revenue •
UBL has been growing faster than market
UBL - Performance 24 5000
Strong: Premium: Industry Growth 8.0% Industry Growth 23.4% UBL 14.9% UBL 8%* 16.7
268
567
2310 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 UBL Sales (mio cases)
18.6m
18.7m
17.7m
UBL Sales (INR mio)
23.0m
Acquired Breweries - Performance
18 26 2002
Dec 06
26.8
2003
2004
2005
2006
5670
2007
06 Dec 07 Dec Acq. 07 brands Sales Dec (Lakh cases) Acq. brands Sales (Rs.in crs)
•
YoY (6 years) in sales volume and revenue growth in acquired breweries (Post acquisition) – 100% pa & 124% pa respectively
1.8 260 2002
2003
2004
2005
2006
2007
Acq. brands Sales (mio cases) Note: Year ending 31st March
Acq. brands Sales (INR mio)
* 9 months
32
Snapshot of Financials INR in mio
•
KF Strong and KF premium outgrow the industry
Dec 2007*
•
New greenfield breweries commissioned and in operation Capacity investment for 2008-09 on track
FY 2006
Total Revenue
9,761
10,749
7,058
Cost of goods sold
4,954
5,310
3,040
561
642
450
Marketing and Selling expenses
2,340
2,508
1,569
Other overheads EBITDA
511 1,394
674 1,615
627 1,372
Interest
283
280
239
Depreciation
425
385
209
Staff costs
•
FY 2007
Other Income
(305)
Non recurring Expenditure PBT Income tax PAT
686
950
619
(257)
(299)
(425)
429
651
194
•Standalone for 9 months 1US$ = 39.40 INR
33
UBL – Debt Position December 2007 INR in mio Term Loans * Unsecured Loans
2,610 505
Working Capital Loans
1,031
Total Liabilities
4,146
Less: Cash & Cash Equivalent Net Debt
192 3,954
Debt / Equity^
1.27
Debt / EBITDA^
1.76
Blended Cost of Debt (%)
9.50%
^ Annualized
* Term Loans includes INR 863 mio utilized for acquisition of subsidiary and INR 1,225 mio for Capex
34
New Initiatives •
Marketing – Launch “KF Ultra” in Super Premium Category – Launch “Buzz” to widen consumer base – Innovation in Packaging : •
–
Contemporary Dressing, New Design Bottles, New Range of SKU’s
Innovation in 3600 Brand presence : • •
Launch of the NDTV Good Times channel Experiential Marketing
•
Manufacturing – First 25,000 BPH line in India at UB Rajasthan – 36,000 BPH line being installed at UB Bombay – New Products being developed in-house at CTC – Innovative Brewing Technology Development in process
•
Capital Raising –
To fund capex planned to meet robust growth expectations, a rights issue of about Rs. 4,250 million underway.
35
Kingfisher Airlines Limited 36
Air travel potential in India •
Domestic Traffic (pax) : 20 M in 05 – 25 M in 06 – 35 M in 07
•
Growth potential for domestic air travel linked to the surge of the Indian middle class –
•
Significant tourism growth perspectives – – –
•
4 M foreign annual visitors Tourism Ministry targets 10 M tourists by 2010 World Tourism Organisation forecasts 25 M tourists by 2015
Forecasted Growth in the number of passengers (IATA) – –
•
Bracket of population evolving as a young, consumerist and urban generation bound to make an ever-greater use of air transport
Domestic : 20.4% p.a. in average from 2007 to 2010 International : 7.3% p.a. in average during the same period
Wealth is no longer confined to metro cities but widely dispersed in under served secondary cities. Huge potential to start new routes and attract business from higherincome groups.
37
Evolving market place •
India fleet of 320 aircraft compared to China 1,120 planes for a similar population size
•
20 M Indians travel by train in one day, against 35 M by air in one year
•
Market liberalization initiatives : lower taxation (Air Travel tax, Airline Turbine Fuel tax, landing fees…), gradual open skies, signature of expanded bilateral agreements, incentives for privatization & investments in airlines
•
Airport infrastructures are improving. Private sector building new airports in South India which is the KFA/Deccan focus area
•
Indian airlines only carry 32% of international passengers to & from India
•
Mumbai/ Delhi and other major airports being decongested
38
UB Group and Aviation •
UB Group, having achieved dominance in its core beverage business, was looking to leverage its unique strengths in – – – –
Understanding the needs of the evolving Indian consumer Creating premium products at true value Operating in a highly regulated environment Leveraging brand equity
•
Aviation offers extra ordinary growth potential
•
Success based on three core strengths – – –
•
Ability to tightly manage costs Ability to manage scale up Ability to deliver a unique experience while remaining competitive
With the acquisition of Air Deccan, UB now caters to the entire spectrum of air travelers
39
Management Advisory Board •
•
Kingfisher’s Advisory Board has the who’s who of the international aviation industry – –
Sir Ralph Robins
- Former Chairman of Rolls-Royce
–
Sir Colin Terry
- Former Chief Engineer and Head of Logistics – Royal Air Force
–
Mr. Stewart John, OBE
- Former Head of Engineering Cathay Pacific Airways
–
Mr. H Lr Karel H Ledeboer - Former CEO of KLM Royal Du Airlines and COO – Swiss Airlines
–
Mr. David Turnbull
- Former Chairman of Swire Pacific Ltd and Cathay Pacific Airways
Kingfisher will be greatly benefited from the immense knowledge of this team of Advisory Board members
40
Milestones •
KFA + Deccan Aviation Limited (DAL) achieved a market share of about 30% within 27 months of operations as compared to Jet Airways (Jet + Jet lite) market share of about 30% - 14 years after launch
•
KFA + DAL second largest domestic airline group with a fleet of 75 aircrafts. Quickly ramped up the same in 27 months as compared to Jet’s fleet size of 76 aircrafts for domestic operations (as of July 2007)
•
Over 5600 flights operated within 27 months of launch
•
Flown –
1 million guests in 10 months
–
2 million guests in 15 months
–
3 million guests in 19 months
–
4 million guests in 22 months
•
KFA connects 31 cities and DAL 66 cities. Combined Coverage 72 cities
•
Inducted an average of more than 1 aircraft per month which is amongst the highest induction rates in the world
41
Market Share – KFA Leading operator 45%
40% 35%
30% 25%
20%
15% 10%
5% 0% May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- Jun- Sep- Nov05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07
-5% Kingfisher
Jet
Sahara
Indian
Go
Paramount
Indigo
Indus
Deccan
Spice
Note: 1. Jet and Sahara Markets shares consolidated from Jan 07 2. KFA and DAL market shares consolidated from May 07
42
Fleet plan • •
Current fleet: 24 A320F +1 Corporate jet + 15 ATR (December 2007) Fleet Plan of over 150 aircraft
Average Number of Aircraft per Fiscal Year 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
ATR
A320F
WB
FY FY FY FY FY FY FY FY FY FY FY FY FY FY 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 A uA
•
Deliveries well spread until FY18/19 and commensurate with expected growth in demand for air travel
43
International Strategy •
Current Government policy requiring 5 years of domestic operations prior to flying overseas likely to be reduced.
•
Deccan will be completing 5 years of operations by middle of 2008. KFA can fly international even in the event of the policy remaining unchanged.
•
India – US – India nonstop flights present the most unique opportunity and reduced competition. KFA will concentrate mainly on this opportunity and has ordered specific aircraft types to undertake this mission.
•
KFA will commence nonstop flights with the Airbus A340 -500 between Bangalore and San Francisco and Bombay and New York in Q2 2008.
•
KFA will commence nonstop flights with the Airbus A330 - 200 between Bombay and London and Bombay and Hong Kong in Q2 2008.
44
Significant Awards •
Winner of the “Best New Airline of Year” Award for 2005 in the Asia-Pacific & Middle East region from Centre for Asia Pacific Aviation (CAPA)
•
Winner of the world-renowned SKYTRAX Award for Service Excellence 200506
•
Winner of the PATWA award for Service and Cuisine
•
Rated as the 3rd most successful brand launch of 2005 by Business Standard – India’s leading business daily
•
Voted as the most preferred airline in a survey conducted by an independent research firm with 46% votes compared to 9Ws 23%
•
Ranked amongst the Top Ten Buzziest Brands of 2005 by agencyfaqs.com and The Brand Reporter
•
No. 1 in corporate category – even ahead of groups like Tata, Reliance
•
Ranked among the top 5 online advertisers by Yahoo India
•
Ranked among the most effective advertisers of ’05- ‘06 by NDTV Profit ,a leading business news channel
45
Performance Indicators – December -07 No of Flights per day - KFA 248 No of Stations Covered - KFA 43 Current Average Ticket Value (USD) First KF Class Combined
$ $ $
330 109 118
Current Average Loads First KF Class
40% 68% 66% 14% 16% 29%
Total Market Share - KFA Deccan Combined Audited FY'06 Particulars Total Revenue Total Operating Costs E B ITDA R Lease Rentals Interest Cash from Operations Depreciation Profit / (Loss) Synergy Benefits from Air Deccan Acquisition Revised Profit / (Loss) Revised Cash from Operations
136 161 (25) 28 4 (58) 1 (58) (58) (58)
Audited FY'07 USD Million 396 437 (41) 69 22 (133) 12 (145)
(133)
Projected FY'08 735 631 104 122 27 (45) 18 (63) 25 (38) (20)
46
Kingfisher – Deccan deal highlights •
49.8% was acquired in Deccan Aviation for about USD 287 million
•
Kingfisher-Air Deccan group is the largest domestic airline group with a current fleet of 81 aircrafts
•
Combined network covering 68 cities is a unique and not easily replicated strength. The reach is larger than Air India, the Govt. owned carrier.
•
The combined airline powerhouse will henceforth work closely to exploit the significant synergies that exist in the areas of operations and maintenance, ground handling, vastly increased connectivity, feeder services ,distribution penetration, etc
•
Both airlines put together offer 568 daily flights connecting 68 cities whilst taking advantage of unparalleled synergy benefits arising from common fleet and enjoy the largest market share of 30% in the Indian aviation industry
•
The deal has provided an opportunity for both the airlines to review their aircraft orders and other capex items like simulators, etc – Significant capex savings
•
Significant operational synergies are expected are expected from this deal for both the airlines
•
Intent to raise capital to take care of the funding requirements of the airline business
47
KFA Deccan – Synergy opportunities •
The two airlines together provide scale which could be the basis of creating a more competitive business – potential no.1 in the domestic aviation industry – Maximum number of departures/day – Largest network of destinations
•
Assets and infrastructure have a strong strategic fit – Similar aircraft type (Airbus/ATR) – Significant increase in airport slots
•
Potential to realize significant revenue, cost and capital synergies
48
KFA Deccan – Synergy opportunities While maintaining respective FSC and LCC focus, two airlines can: • Create a network strategy which provides the combine a competitive advantage • Re-calibrate capacity deployment to facilitate optimal utilization of capital • Use each other’s strength to further the combines sales and marketing prowess • Reduce costs to strengthen respective market positions
49
KFA Deccan – Operating structure Combined functional structure presents best opportunity to facilitate speedy realization of synergies Rationale •
Singular responsibility/accountability is necessary to achieve synergies which are present across all functions –
Separate structure till-date has not been conducive to realization of synergies
–
In a merger situation, critical mass of people should be made responsible for both the businesses
•
Unique KF/DN context would ensure –
Appropriate distinctions between KF and DN would remain – Aircraft configuration, cabin costs, channel focus
– •
Difference in costs of two brands would remain intact
Functional structure would be designed to ensure that respective nuances of each airline are protected as appropriate
50
KFA Deccan – Proposed legal structure & next steps Single share denomination’ for entire value of two airlines presents best opportunity to maximize business opportunity and synergy realization Rationale •
Full synergy realization not possible with separate legal structure
•
Allows development of a “flexible” business – source of competitive advantage
•
Covers all customer segments in the market which captures both profitability and growth opportunity
•
Creates scale – potential no.1 in the domestic aviation industry
• • •
Positions business as an attractive alliance partner, if necessary Obtain board approval on ‘business direction’ Align operating management and prepare the combined business for implementation of synergy opportunities
51
Other businesses / investments UB Engineering • •
UBHL holds 34.74% of UB Engineering One of the foremost Indian engineering companies in the field of installation of industrial plants Focus on projects in Power, Fertilizers, Oil & Gas, Fire Fighting, Effluent Treatment, Agrotech and other sectors Recently awarded ISO 9001:2000 Certification for its operations covering Installation, Erection, Commissioning, Testing and Maintenance Turnover of over US$ 70 mnin 2006-07
•
•
•
Real Estate • • •
•
•
Mangalore Chemicals & Fertilizer •
•
• •
UB Group took over MCF - a "potentially sick " unit with accumulated losses in excess of US14 mn Manufacturing capacity including 2,17,800 MT of Ammonia and 3,80,000 MT of Urea Brands- Mangala Urea and DAP Manufacturing capacity including 2,17,800 MT of Ammonia and 3,80,000 MT of Urea Co. achieved a turnover of US$ 150 mn
Owns ~500,000 sqft of prime property at Bangalore Prorject competed - UB CITY will house the Group offices under one roof It will also house commercial offices, banks, high-end retail stores, 1 five star hotel, serviced apartments, restaurants, food courts, pubs, health clubs, cafes etc Current market value of property is ~ US$ 125 mn as against a holding cost of US$ 40 mn Rental income estimated at ~ US$ 5.5 mn p.a
Aventis • • •
•
UBHL holds 10.28% of Aventis Established in 1987: Vittal Mallya Scientific Research Foundation (VMSRF) Recognized by the Departments of Scientific & Industrial Research (DSIR), Dept. of Biotechnology (DBT) Several patents to its credit
52
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