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Manu Chhabria to sell SWC pie to strategic ally

Palakunnathu G Mathai

Manohar (Manu) Rajaram Chhabria is readying to offload equity in Shaw Wallace & Company to a strategic partner.

Chhabria is also taking Shaw Wallace global -- marketing offices are to be opened in Europe, two beer brands are being exported to the UK and he is trying to buy a distillery in Scotland.

In his first interview to an Indian newspaper in years, the Dubai-based non-resident Indian businessman explained that he was splitting SWC into three companies - the Rs 15.40 billion SWC itself would be the holding company, while the beer and distillery businesses would be separate companies -- because this would provide an opportunity to unload an as-yet-undetermined percentage of the equity to a strategic partner.

"Once the restructuring is over, we will not hesitate to look for a partner. I went to one of the world's biggest beer companies two weeks back.

They want to sign immediately, with no conditions attached. But we must have the production capacity to give. Our utilisation of installed production is 105 per cent. So I want to install more capacity," Chhabria said.

SWC is in the process of setting up four more breweries (in Kerala, Karnataka, Madhya Pradesh and West Bengal) at a cost of Rs 1 billion (the promoter contribution will be 50 per cent in most of these cases) and the current 22 million case capacity is being doubled.

But Chhabria clarified that he was in no hurry to tie up with a partner or strike an alliance, that getting cash was not the prime reason for inducting a partner, and that SWC was generating cash and had honoured all its inter-corporate deposits and paid off all depositors. He also said the company's balance sheet had been cleaned up.

He said he'd hired McKinsey again to take SWC global. McKinsey, he said, told him that SWC would have to push to be number one in the Indian market (it now lags behind Vijay Mallya's UB Group) and cut costs across the board. "McKinsey says we will save Rs 1.20 billion," he said.

At home, meanwhile, Shaw Wallace is embarking upon a complete makeover of its labels, bottles and cartons.

"In October, we are going to introduce new labels, bottles and cartons - a total repackaging across the board. We've gone to the best - if you want to compete with foreigners, you have to play their game.

"We've gone to the same people who developed their labels and brands, Claessens of the UK, the world's biggest label producer. We're spending million on this. It's a recurring expense," Chhabria said.

Shaw Wallace will also be sponsoring national sports events. For starters, it will be sponsoring a Royal Challenge India Open golf tournament next year and spending Rs 80 million on this.

Chhabria said Shaw Wallace already sells Lal Toofan beer in the UK and has, now, started shipping Kohinoor there.

"After this we want to enter the US market. For the first time our products have been accepted by the Food & Drug Administration," he added.

Chhabria acknowledged that he would find it tough to buy a distillery in Scotland.

"It's difficult to enter Scotland. They have a cartel. They'd prefer to mothball a distillery than sell it," he said.

Still, the one-time takeover tycoon had said six years ago that he'd buy a Scotch whiskey company but mothballed the plan.

"We didn't have money. SWC is now generating cash and I am ready to expand," he explained. Also, the Lal Toofan brand has been around in the UK for some years and is said to lag behind other rival Indian brands.

Chhabria also pointed out that he could introduce his Scotch whiskey in India if his acquisition plans succeeded. "I can bring Scottish technology and I can say that my brands are made in Scotland."

The UB Group, which competes with SWC in the liquor business, too exports beer to the UK. UB Group chairman Vijay Mallya acquired a brewery in South Africa.

Asked whether the strategies coincided in both cases, Chhabria replied: "We're not going to acquire anything in South Africa. I'm not a fool to go there. He went to a market dominated 99 per cent by South African Breweries. Neither am I going to the US and buying breweries there. Corona beer can be produced in Mexico and become famous. Why not my Kohinoor beer from India?"

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