United Breweries Shares Plunge 7% On Suspending Beer Supply To Telangana Beverages Corp

Shares of United Breweries, the maker of Kingfisher beer, fell more than 7% following the company’s announcement that it would suspend the supply of beer to the Telangana Beverages Corporation Ltd. with immediate effect.

In a regulatory filing, United Breweries explained that the decision stemmed from two primary reasons: TGBCL's failure to revise the basic price of the company’s beer since fiscal 2020, leading to significant losses, and the substantial overdue payments by TGBCL for beer supplied in the past.

The company stated that these factors had rendered the continued supply of beer to TGBCL "unviable."

UBL had total trade receivables of Rs 2,434 crore in its balance sheet as on Sept. 30, 2024, and the company had receivables of Rs 700-800 crore outstanding from Telangana for the period of January to May 2024.

Notably, TGBCL is a government-owned entity responsible for the wholesale distribution of alcoholic beverages in the state of Telangana. It acts as an intermediary between manufacturers and retailers, playing a crucial role in the state's liquor distribution network. The corporation’s policies and pricing structure significantly impact beverage producers.

United Breweries, known for its flagship Kingfisher brand, is one of India’s largest brewers, with a diverse portfolio of beer products available across the country.

In a statement, United Breweries suggested that it would be supporting employees who could be affected by the decision to halt the supply of beer to TGBCL.

"Our company contributes more than Rs 4,500 crore annually to the state’s revenue. Despite the mounting financial pressures, we have ensured the uninterrupted supply of our beer, driven by our commitment to consumers and customers. We urge the state government to take swift action and work with us to safeguard livelihoods, restore financial sustainability, and ensure the continued availability of our products," it said.

The scrip fell as much as 7.52% to Rs 1,919.20 apiece. It pared losses to trade 3.95% lower at Rs 1,993.35 apiece on the National Stock Exchange, as of 2:30 p.m. This compares to a 0.19% decline in the NSE Nifty 50 Index.

The stock has risen 7.01% in the last 12 months. Its total traded volume so far in the day stood at 4.7 times its 30-day average. The relative strength index was at 44.

Out of 16 analysts tracking the company, seven maintain a 'buy' rating, four recommend a 'hold,' and five suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 2.5%.