UB Group Update

July 2010

Presentation By Dr. Vijay Mallya, Chairman, UB Group 22nd July, 2010

UB Groups Aggressive Growth History

No. 1 Beer in India No. 1 Spirits in India Organised Spirits business under USL and Beer business under UBL No. 1 Airline in India

Acquired 100% stake in Whyte and Mackay, worlds 4th largest scotch company

Dr. Vijay Mallya took over the reins of the Group at a tender age of 28

Launched Kingfisher Airlines

19832002 2003 2005 2007

Completed merger of Deccan and Kingfisher to form the largest pvt. airline

19501982

2008

2009

Started and expanded into beer and spirits business mainly through acquisitions

Kept acquiring smaller players in beer and liquor industry. BUILT BRANDS LIKE KINGFISHER, BAGPIPER, BLACK DOG

Acquired Shaw Wallace,

Brought in Scottish New Castle in UBL

Acquired 100% stake in Whyte and Mackay, worlds 4th largest scotch company

Legal Merger of Shaw Wallace completed;

UBL and Heineken strike a deal: brings APB / Heineken brands

UB Group
United Spirits Ltd., No. 1 Spirits Company in India 2nd largest spirits company in the world and largest spirits company in India with a market share in excess of 55% in first line brands Key brands are Dalmore, Jura, Whyte & Mackay, Black Dog, Antiquity, Signature, Royal Challenge, McDowell's No.1, Celebration Rum, Romanov and White Mischief Undisputed leader of the Indian beer industry with over 50% market share

United Breweries Ltd., No. 1 Beer Company in India

Key brands are Kingfisher Blue, Kingfisher Strong, Kingfisher Premium, Kingfisher Ultra, Kingfisher Draught, London Pilsner, UB Premium Ice, Kalyani Black Label Premium and Kalyani Black Label
Best Airline in India and Central Asia, Best Economy Class Seats and Staff Service Excellence Award for airlines in India and Central Asia in World Airline Awards (May, 2010) India's only 5 Star airline, rated by Skytrax and 6th airline in the world for 3rd consecutive year (May, 2010) Diversified presence across businesses including equity investment in Mangalore Chemicals & Fertilizers Ltd. and UB Engineering Ltd., investment in Vittal Mallya Scientific Research Foundation and franchisee for IPL team Royal Challengers

Kingfisher Airlines Ltd., No. 1 standalone Airline in India

Diversified Business Interests

United Spirits: Overview

Business Overview Largest spirits company in India 20 Millionaire brands (those that sell more than 1 MM cases p.a.) with a market share in excess of 55% in first line brands USL sold 100 MM cases during FY 2010 to become the 2nd largest spirits marketer in the world. Growing at robust double digit rates Several of USLs brands occupy leading market positions in India and globally McDowell No. 1 family is the largest spirits brand in the world with sales of over 35 MM cases in FY 2010 across 3 flavors (Whisky, Brandy and Rum) McDowells No. 1 Brandy continues to be the largest selling brandy in the world McDowells No. 1 Celebration Rum is the 3rd largest rum with sales over 12 MM cases in FY 2010 Bagpiper Whisky is worlds largest selling spirits brand with sales of over 16 MM cases during FY 2010
At the current growth rate of 12% pa, USL is poised to become the No.1 Sprits company within the current fiscal
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Financial Snapshot Q1 ( INR Crs)

Revenue

EBITDA

PAT

USL Financials: Q1 Update

Volume

Volume growth at 6% overall and 15% without AP Volumes at 26.7 Mio cases Q1 FY 11 compared to 25.6 Mio cases in Q1 FY10 Low volume growth mainly on account of de-growth of 30% in Andhra Pradesh ( due to license renewal at retailers level) which accounts for almost 19% of total revenue. Post renewal, July has witnessed extremely strong growth.

Sales

Key Brand Performance Scotch 39% Signature 21% Antiquity 20% Directors Special Black 41% No. 1 Brandy 29% No. 1 Rum 19% Green Label 20%

Sales value growth at 18%. Adjusted Sales value growth at 11% in Q1 FY11 vs.6 % in Q1 FY10 Sales value grew at Rs. 1463 Crs. in Q1 FY11 Vs. Rs. 1242 Crs. In Q1FY10

USL Financials: Q1 Update

Profitability

Cost trends

EBITDA of Rs. 289 Crs. in Q1FY11 Vs. Rs 228 Crs in Q1 FY10. EBITDA growth - 26.5%. EBITDA margin at 19.75% in Q1 FY11 compared to 18.83% in Q1FY10

ENA cost at Rs 143 per Case during Q1 FY 2011, expected to remain at the current levels during Q2 and expected to go down once fresh supplies come in
Glass prices expected to go up by around 7% from August 2010 Adjusted A&SP(regrouped for tie up units)expenditure is Rs. 107 Crs which is approximately 7.3% of net sales. Staff cost at Rs. 77 Crs. in Q1 FY11Vs. Rs. 68 Crs. in Q1 FY10. Remains constant at 5.2% of net sales

Operational PBT (excluding exceptional income) grew 12% to Rs. 182 Crs. in Q1 FY11 Vs. Rs. 163 Crs in Q1 FY10 Adjusted PAT at Rs. 121 Crs. in Q1 FY11 vs. 108 Crs. in Q1 FY10

United Spirits: Financials & Debt Profile

Financials Debt Profile
in INR Crs

in INR Crs

Q1 FY2011 1471 672 289 182

Q1 FY2010 1248 530 228 163

Growth 18% 27% 27% 12%

Jun-10 441 1,726 1,284 3,451

Mar-10 614 1,408 1,284 3,306

Revenues Gross profit EBITDA

Capex Loans/ Term Loans Working Capital/ Unsecured Loans

Term Loans : Acquisition of W & M

Sub -Total W & M Acquisition Loan - Without recourse Total Gross Debt Cash & Bank Balance Total Net Debt

Operational PBT PAT

2,231 5,682
469

2,186 5,492
750

121

177

5,213

4,742

Value of 8.4 mio treasury stock amounts to about Rs. 1169 Crs.

United Spirits: Strategy Going Forward

Continued Focus from Previous Business Plan Additional Focus in Current Business Plan

Value Growth to lead Volume Growth Focus on Premiumization by enhancing salience of prestige + segments Focus on improving ROCE to Best in Class FMCG companies in India ATL investments to be enhanced to support core brands Take appropriate price increases to offset any cost push BTL as a % of NSR to be controlled

Planned investment of about Rs. 1100 Crs over the next 3 years to build additional primarily distillation , increased bottling capacity and malt spirit production facility Introduce new brands in the premium segment, increase presence in the scotch segment across various price points & introduce W&M brands Leverage Whyte & Mackay expertise Extend Whyte & Mackay brands in India Leverage blend & packaging expertise for new product development in India

Global Scotch Whisky market has seen resilient growth with strong support coming from large emerging markets

Global Scotch whisky market is growing at a value CAGR of about 7% ( 2004-09) which is significantly higher than volume CAGR of about 2%.

Premiumization trend in scotch whisky segment

Volume (Mn. Cases)
100
80
20-Yr CAGR

W&Ms average branded business realization for relevant vintage is 4 to 4.5 times that of bulk business

13.7% 4.7% 0.3% 1.5%

60 40
20

Clear premiumization trend in Scotch with premium scotch segments growing at a faster pace than standard/value scotch segment. Single Malt whisky segment has grown significantly higher than blended scotch whisky with a volume CAGR of about 6%.
Volume (Mn. Cases)

0
Value Premium

1988

2008 Standard Super Premium

Growth trend in emerging markets

4 Yr CAGR (2004-08)
20-Yr CAGR

Increased preference for higher vintage scotch and single malt

whiskies.

4.4% 0.1%

Sustained growth in large emerging markets of China, India, Russia, Brazil, and South Korea over the last decade.

* 2-Yr CAGR

Whyte & Mackays strategic intent has been to become a branded scotch whisky player
W&M has a salient position in the global scotch whisky market
W&M is among the top 5 scotch whisky players globally. o Produces 8% of global scotch whisky consumption. W&M has a portfolio of heritage brands across the spectrum. o Single Malts: Dalmore, Isle of Jura. o Blended Scotch : Whyte & Mackay, John Barr, Claymore W&M has been recognized in the international arena for its strengths. o Won the Global Distiller of the Year recognition in 2009 at the International Wine & Spirits competition. o Whyte & Mackay 30 year old was named Best Whisky in the World 2009 o Dalmore Oculus sets a new record at auction with a sale value of GBP 37,000

Post the acquisition, W&M has enhanced its focus on the branded business.

Strengthened route to market

o Completed transition to own setup in UK, revamped import & distribution in US. o Established new importer / distributor tie ups in China, Taiwan, South Korea, Middle East and South Africa. o Enhanced coverage of Duty Free channel from 5 to 30 key locations. o Increased distribution of scotch brands in India by 40%

Enhanced brand positioning

o Launch of premium variants in Dalmore. (Gran Reserva, King Alexander, 40 & 50 YO variants), Jura and W&M. o Premiumized packaging for key brands E.g. Dalmore

Increased malt capacity to support branded business requirements. (reopened Tamnavulin malt distillery )

Since acquisition, the focus of the business has been to create a sustainable growth platform for the future.
Focus areas of the business
Strengthen the branded business
o Improve profitability

3 year performance summary Ended FY2009-10 at an EBITDA of GBP 58 Mn. Net of Diageo contract, EBITDA has grown at a CAGR of 9% since acquisition. Bottled business contribution has grown at a CAGR of 20% over the 2006-07 to 2009-10 period. Planned decline of bulk business (net of Diageo contract and USL requirement) by 28% CAGR since acquisition. Built a more profitable & focused branded business.
o Improved contribution of branded business from 44% to 50% of sales o Increased focus has meant that 80% of contribution now comes from 17 brands / market combination compared to 31 earlier

o Increase depth of the market-brand portfolio against width.

Grow underlying business (net of bulk scotch) and profit Reduce share of commodity bulk sale business Enhance operational efficiency

Overheads have largely remained flat. (Planned redundancy

has helped contain any overhead increase)

Going forward, W&Ms primary focus would be to expand its share of the global branded scotch whisky market
Strategic focus

Plan
Enhance share of premium end of scotch whisky through single malts and high end blended scotch rare editions.

Premiumize branded scotch sales

o
o

Target of 25% growth in single malts over next 3 years through Dalmore and Jura
Leverage vintage scotch inventory to introduce high end rare editions. E.g. W&M 30 YO named Best Whisky in the World 2009

Consolidate position in the Indian scotch market. Tap India growth potential
Future growth prospects for blended scotch industry increasingly rests on two markets : India & China - IWSR
o Market growth of 20% over last 4-5 years. However, strong latent demand still exists for Scotch whisky in India. Highest association with premium need spaces of Status and Discernment.(USL Consumer Need scope study) Current entry level retail price of USD 20 per bottle high due to 150% import levy. 99% of Indian spirits market at a < USD 10 price point. o Ended 2009-10 with about 150,000 cases sale at a share of about 15%. Up from <10% 2 years back. Launched W&M special, W&M 13 and Black Dog variants over the last 2 years. o Target to reach 20% market share with 275,000 case sales at a 35% CAGR over next 2 years. o To straddle all scotch sub-segments using W&M portfolio. Launch of Value scotch brand as well as high vintage variants planned. o Further increase scotch distribution to 25000 retail outlets from current 15000 spread.

Going forward, W&Ms primary focus would be to expand its share of the global branded scotch whisky market (cont)
Strategic focus Plan Increase presence in key emerging markets. Reduce UK share of

Tap growth in other emerging markets

branded business from 45% to less than 30% over next 3 years.
o China (60%+ 8Y CAGR) and Russia (20% 8Y CAGR) key focus markets.

Tap opportunities in private label in key markets of Europe

Judiciously position private label and bulk business
o Build presence in key markets of Western Europe. E.g. Germany, Spain. 70% of current W&M private label business in UK.

Bulk scotch supplies to be focused on servicing growth in India.

W&M Guidance

As a result of the deliberate downplay in bulk and focus on branded business, the net sales in FY 2011 will be GBP 110 Mio. The EBITDA for FY 2011 would be about GBP 33 Mio. This level and trend of EBITDA would be adequate to meet debt servicing and Capex until May 2012. The fundamental shift in strategy, which creates long term value accretion to shareholders and a sustainable business model will generate an annual EBITDA of GBP 60 Mio in 5 years time. The company has received several expressions of interest to refinance the debt.

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USL Consolidated

The new business model of WM will still provide an accretive EPS at USL consolidated level.

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United Breweries: Overview

Business Overview With over 50% market share, UBL is the undisputed leader of the Indian beer industry, with over 5 decades of market leadership Sold 101 MM cases during FY 2010 Kingfisher is the ubiquitous Indian beer, available as Kingfisher Premium, Strong, Blue, Red and Ultra UBL is uniquely positioned with manufacturing facilities in all key markets Ensuring freshness of beer Leveraging Indias interstate tariff difference to economic advantage UBL Heineken Deal Heineken holds 37.5% stake in UBL and has a shareholders agreement with UBL based on which Heineken will be active in India solely through UBL. We are working towards creating a unified structure, and realize synergies Heineken will be produced in India by UBL. UBL will now have an access to Heinekens distribution and manufacturing facilities in the international markets, which UBL is currently catering through exports
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Financial Snapshot- Q1 ( INR Crs.)

Revenue

EBITDA

PAT

United Breweries: Q1 Update

UBL volumes have grown with 32%, powered by a 36% growth in strong beer.

NSR growth of 36% is resulting for 90% from volume increase and 10% from price
With an industry growth of 30%, UB continues to strengthen its relative market share of >200 bps Benefiting from economic growth and favourable weather, all regions except the North showed growth rates of 25% and above. In absolute terms, Andhra Pradesh, Karnataka and Maharashtra were the main contributors to our growth. EBITDA margin up from 15.9% to 20.0% due to strong topline growth combined with contained fixed costs

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United Breweries: Financials & Debt

Financials

in INR Crs

Q1 FY2011
776 377 399

Q1 FY2010
557 280 285

Growth
37% 34% 40%

Revenues Cost of Sales Gross profit

72% growth in EBITDA

PAT more than doubled Net debt/LTM EBITDA comfortably below 2.5x

EBITDA
PAT
Debt profile

155
76

90
35

72%
114%

in INR Crs

Q1 FY2011

Q1 FY2010

Net Debt

473

599

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United Breweries: Strategy Going Forward

India is one of the Worlds most exciting beer markets

Beer consumption is only 1.3 liter per capita

Excellent demographics, an expanding middle class, and increasing income levels have huge potential to propel domestic demand

Disposable income set to increase significantly on back of sustained GDP growth

The industry is projected to grow 10 15% volumes in the near term, and UBL will take its share UBL plans to continue investing in capacity and capability to meet growing consumer demand UBL expects to benefit from economies of scale arising from capacity growth both strategically and financially

UBL intends to focus on the emerging premium segment through offerings such as Kingfisher Ultra and Heineken

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Kingfisher Airlines: Overview

Business Overview

Market Share
N ACIL [(I)] 1 7 .7 % IndiGo 1 5 .7 % Go Air 5 .9 % Paramount 0 .3 % Spicejet 1 3 .2 %

Started airline operations in May 2005, merged with Deccan Aviation w.e.f. April 2008. Operates around 380 flights a day Started international operations in September 2008 by connecting Bangalore to London Network spread across 61 Indian cities and 8 foreign cities with a fleet size of 66 aircraft Carried 3.1 Mio passengers in Q1 FY2011

Jet Airways 1 8 .2 %

JetL ite 8 .0 %

Kingfisher 2 1 .0 %

Financial Snapshot ( INR Crs)

KFA Is Focused on Profitability

KFA has cut capacity by 20% % in domestic & 6% in international routes. Number of aircrafts reduced by 20 % (80 vs. 64) in the same period Aircraft utilization has been increased by 11% (FY 2010 vs. FY 2009) to ~12 hrs for Airbus and ~10.3 hrs for ATRs
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KFA: Q1 Update
Overall EBITDA profit of Rs 127 Cr (An improvement of Rs 198 Cr over Q1 FY 10)

Domestic operations EBITDA profit at Rs 177 Cr in Q1 11 (An improvement of Rs 101 Cr) Domestic EBITDA margin improved from 6% to 13%

Total RASK of domestic operations improved by over 26% to Rs 4.63 over Q1 FY 10

Load factor up 12 percentage points to 81%; ATV improved by 5% over same period last year Ancillary revenue doubled in comparison to Q1 FY10; driven by growth in Xpress Cargo & FFP alliances

Ex-Fuel CASK reduced by 10% over FY10 (Rs 2.65 vs. Rs 2.95) on the back of several cost control initiatives

International operations EBITDA Loss at Rs 51 Cr (An improvement of Rs 96 Cr) New International routes launched in calibrated manner Presence expanded on existing markets of LHR, HKG, BKK and DXB in order to strengthen position Initial performance in line with expectation - EBITDAR profit margin of 4% ( vs loss of 110% in Q1 FY 10) Revenue has increased 4 times with a doubling of capacity on international routes Load factor up 16 percentage points to 76% ; Revenue per RPK improved by 46% over same period last year

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KFA: Q1 Update

Total Operating Revenues of Rs. 1,640 Cr (+29% over Q1 FY 10) Domestic Revenues of Rs. 1,324 Cr vs. Rs. 1,191 Cr in Q1 FY 10; 11% increase in revenue despite 14% reduction in capacity (seats offered)

International Revenues of Rs. 316 Cr vs. Rs. 81 Cr in Q1 FY 10; growth disproportionate to capacity increase

EBITDAR profit of Rs 367 Cr vs. Rs 226 Cr profit for Q1 FY 10

Domestic EBITDAR of Rs. 354 Cr vs. Rs. 315 Cr in Q1 FY 10; improvement of Rs 39 Cr with improved EBITDAR margin of 26% vs. 24% in Q1 FY 10 International EBITDAR profit at Rs 13 Cr ; improvement of Rs. 102 Cr in comparison to Q1 FY10; improvement seen on the back of strong acceptance of Kingfisher product and new route additions

EBITDA profit of Rs. 127 Cr vs. loss of Rs. 72 Cr in Q1 FY10 Domestic EBITDA profit of Rs.177 Cr vs. profit of Rs 75 Cr in Q1 FY 10; despite excess costs of Rs. 35 Cr incurred on account of aircraft on ground in the current quarter International EBITDA loss of Rs. 51 Cr vs loss of Rs 147 Cr in Q1 FY 10

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Kingfisher Airlines : Key parameters

Load Factor Trend Average Ticket Value Trend

Kingfisher Airlines: Initiatives

Cost-reduction initiatives
Non Fuel cost Reduction of Rs. 530 Cr achieved in domestic operations FY10

Capacity rationalization
20% reduction in domestic operations and 6% reduction in international operations in FY10

Reduction in lease costs through redelivery of non-operational aircraft and lease renewals at lower rentals (~ Rs. 176 Cr reduction in FY10 over FY09)
Reduction in personnel costs by replacement of expat pilots by Indian pilots (~ Rs. 108 Cr reduction in FY10 over FY09) Achieved reduction in other operating costs through tighter controllership (~ Rs. 246 Cr reduction in FY10 over FY09) Appointed Seabury as aviation consultant and identified further improvement opportunities of Rs. 168 Cr

Shifting of capacity from Kingfisher Class to Kingfisher Red Kingfisher Red now accounts for around 65% of the capacity offered on domestic routes

To join One World Alliance in 2011

Would provide greater access to international network without significant capital expenditure Appreciable increase in Domestic and International traffic expected through this alliance

Fuel monitoring system implemented to drive reduction in fuel consumption

Renegotiating vendor contracts in order to reduce engineering & maintenance costs Planned reduction of S&D costs through restructuring of GDS contracts and planned channel shift Significant further reduction possible on Fuel & Airport charges based on improved cash flow

Kingfisher Airlines: Strategy Going Forward

Further revenue enhancement initiatives planned in FY11 Membership with One World Alliance to drive passenger growth in domestic and international markets Launch of code share operations with British Airways Further leveraging international Points of sale to stimulate demand in key international markets

Further growth of Kingfisher Xpress service to tap under penetrated DTD air-cargo delivery market Stringent cost reduction initiatives planned Reduction in S&D costs by undertaking a channel shift and other planned initiatives around the GDS systems Reductions in Engineering & Maintenance costs through new contracts in specific areas Further tighten controls across Overheads Equity being infused through GDR issuance and infusion of promoter funds
Conversion of Rs. 3,950 mio of unsecured loans & preference capital from UB Group into equity Planned Infusion of equity amounting to Rs. 3,500 mio in FY 2011

KFA to raise around USD 200 mio by issue of GDRs in FY 2011

Citibank, Morgan Stanley, CLSA and UBS have been appointed as the bankers Preliminary road shows have been conducted

SBI Caps has been mandated with the task of financial restructuring

Process is expected to be completed in a 6 - 8 weeks time period

Proposal: 9 year repayment of all loans with a 2 year moratorium on principal repayments

UBHL Overview
Overview

Single window to invest in the growing Indian consumer story Owns controlling stakes in UB Groups market leading companies: USL, UBL, KFA. Each of the principal investments is dominant leader in its space Each investee company is in a fast growing segment catering to current and emerging consumer trends Apart from the above key investments, other group investments into engineering, fertilizers are also through UBHL Transparent shareholding structure and ultimate economic benefit of holding in each of the investments flows to UBHL Also holds stake in UB City and UB Global.

UB Global

Engaged in the export of spirits, beer, leather footwear, apparel and processed foods UB Globals turnover for Q1 FY 2011 was about Rs 34 Crs Prestigious clients such as GEOX, Esprit, Bugatti, Pavers England, Asda, Colins, Gaastra and Next
26

UB CITY Is in the heart of Bangalores central business district UB City complex comprises of serviced apartments, restaurants, food courts, pubs, health clubs, cafes and multi-level parking facility UB City is the best mixed use development City scape awards Annual rental revenue from commercial space Rs. 25 Crs and from retail space Rs 9 Crs Planning permit obtained for construction of additional 500,000 square feet by way of super premium residential space in UB City. 55% accrues to UBHL

UBHL : Q1 Financials & Value of Investments

Financials Value of Investments Equity Stake of UBHL 29.11% 12.6% Market Cap *
(INR Crs.)

in INR Crs

Q1 FY2011
68 26 1,624 1,522

Q1 FY2010
70 27 1,510 1,305

Assets USL UBL

CMP
(Rs.)

Value of UBHL investments

(INR Crs.)

Revenue EBITDA Shareholders Funds Net Debt

1,391.5 234.7 49.4 34.2 194.2 96.1

17,476 5,634 1,314 405 331 117

5,087 711 796 99 123 42 892 7,751 1,340 6,411

KFA
MCF UB Engineering McDowell Holdings Real Estate Total Less Net Debt Net Asset Value

60.6%
24.5%

37.2%
36.2%

*Closing prices of July 20th, 2010

Diversified Business Interests

Mangalore Chemicals & Fertilizers Ltd. Only manufacturer of chemical fertilizers in Karnataka Produces a wide range of products that include urea, di-ammonium phosphate, granulated fertilizers, micronutrients and soil conditioners

Q1 FY 2011 Total Income Rs. 490 Crs (+22%) PAT Rs. 13 Crs (+67%)
Into EPC, O&M and Erection services for large industrial projects such as power, refineries, steel, cement, etc YTD FY 2010 Total Income Rs. 527 Crs PAT Rs.31 Crs (+46%) The Bangalore-based franchisee one of eight in the Indian Premier League T20 cricket tournament possibly the worlds largest commercially run sports event

UB Engineering Ltd.

Royal Challengers

Vittal Mallya Scientific Research Foundation 28

Is a non-profit organization named after Dr.Vijay Mallyas father, Mr. Vittal Mallya Is into research in areas of biotechnology and organic chemistry

Thank You

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United Spirits: Raw Material Cost

United Spirits : Glass Cost Movement