Voting Advisory United Spirits Limited Postal Ballot Company Profile Outcome Date: 14 December 2012 BSE: 532432|NSE: MCDOWELL-N Receipt Deadline: 13 December 2012, 5:30 P.M. ISIN: INE429C01035 Notice Date: 9 November 2012 Industry: Breweries & Distilleries Postal Ballot Rukmini, 1st floor, 252/C, 2nd C Main, Girinagar I Phase, Bangalore – Index: BSE 100 / CNX 100 Mailing Address: 560 085. Face Value: Rs. 10 Mkt Price: Rs. 1791.5 (16 Nov. 2012) Fiscal Year End: March Background United Spirits Ltd (‘USL’ or ‘the company’) is one of the largest spirits company in the world by volume. It exports to over 37 countries. It has established manufacturing and bottling plant in Promoter: Vijay Mallya and group every state of India. Its brands include McDowell’s No 1, Bagpiper, Royal Challenge, Antiquity, companies Old Tavern. Whyte & Mackay and Bouvet Ladubay are wholly owned subsidiaries of USL. Total Stake Of which % Pledged Agenda Items 27.78% 97.95% Sl. Type1 Description of resolution IIAS Recommendation No Issue of 14.5 mn equity shares on preferential 1 Spl. basis to Relay B.V, an indirect wholly owned FOR Financials subsidiary of Diageo Plc Particulars FY12 (Rs bn) 1. Ordinary/Special Resolution Total Income 77.2 Net Worth 58.8 Executive Summary (click on respective link for detailed analysis) Equity Capital 1.31 Resolution 1 USL proposes to issue 14.5 million equity shares to ‘Relay B.V.’ (Relay), a Mkt. Cap (16 234.3 subsidiary of Diageo plc (Diageo). The equity shares will be issued at Rs 1440 Nov 2012) per share. This will translate into a 10% equity dilution. Relay will also Overview (Rs.) purchase 25.2 mn shares of the company from United Breweries Holdings 52 week H-L 1954 – 450 Ltd. and other promoters of the company. Post this allotment and share Current P/E (x) 68.4 purchase, it will own in aggregate 27.36% stake in the post issue share capital. This will be followed by an open offer to acquire up-to 26% post Industry P/E (x) 69.0 issue share capital of the company. Diageo will hold up-to 53.36% stake in Current P/B (x) 4.0 USL post the completion of the transactions. Vijay Mallya will hold 14.9% in Source: IIAS Research, USL and, will continue to be the chairman of USL. Moneycontrol

Previous Advisory United Spirits Ltd. AGM 25 September 2012

Write to us Institutional Investor Advisory Services 15th Floor, West Wing, PJ Tower Dalal Street, Mumbai -400 001 Email: [email protected] www.iias.in

20 November 2012 United Spirits Ltd. 1 | P a g e

Voting Advisory

Financial Performance (standalone) Price Performance Particulars (Rs bn except FY10 FY11 FY12 30.0% 23% per share figures) 20% 18% 20.0% Total Income 49.9 64.7 77.2 10.0% EBITDA 8.3 10.6 11.3 0.0% EBITDA Margin 16.7% 16.4% 14.6% 3 YR 5 YR -10.0% -6% -3% PAT 3.76 3.85 3.42 -20.0% -30.0% PAT Margin 7.5% 6.0% 4.4% -40.0% EPS 32.5 29.5 26.2 -38% -50.0% ROANW 9.6% 7.8% 6.2% BSE 100 CNX 100 United Spirits ROACE 9.4% 11.5% 11.4% 3 YR: November ‘09 to October ‘12 Debt/EBITDA (x) 4.2 3.4 3.8 5 YR: November ’07 to October ‘12 Source: IIAS Research Source: Company Filings, IIAS Research, Moneycontrol

Top 10 Public Shareholders No. of Shares held Shares as % of Total No. Sl. No. Name of the Shareholder (millions) of Shares HSBC Global Investment Fund A/c HSBC Global Investment Funds 1. Mauritius 7.0 5.4 2. Credit Suisse (Singapore) Ltd 4.4 3.4 3. Palmer Investment Group Ltd 4.4 3.4 4. USL Benefit Trust 3.5 2.6 5. New World Fund Inc. 3.0 2.3 6. Platinum Investment Management Ltd A/c Platinum Asia fund 3.0 2.3 7. Orbis Sicav-Asia Ex-Japan Equity Fund 2.5 1.9 8. Deutsche Securities Mauritius Ltd. 2.4 1.9 9. Platinium Investment Management Ltd A/c Platinum International Fund 2.0 1.6 10. Vanguard Emerging Markets Stock Index Fund Aseries of Vanguard Intern 1.8 1.4 Total 34.0 26.2 Source: BSE

Change in Shareholding Pattern (%) Shareholding Pattern

Year Promoter DII FII Others Others Promoter 21% Sep-12 27.8 4.9 46.2 21.1 28% Jun-12 27.8 6.1 49.8 16.3 Mar-12 27.8 7.3 47.5 17.4 FII DII Mar-11 28.0 3.0 50.3 18.6 46% 5% Mar-10 29.2 6.8 46.3 17.8 Mar-09 36.6 7.4 30.6 25.4 Mar-08 36.6 1.8 34.2 27.4 Mar-07 38.8 2.0 29.6 29.7 Source: BSE, as at 30 September 2012 Source: BSE

20 November 2012 United Spirits Ltd. 2 | P a g e

Voting Advisory Category: Issue of Securities

Resolution 1: To issue equity shares on preferential basis to Relay B.V. To issue 14.5 million equity shares to Relay B.V., an indirect wholly owned subsidiary of Diageo Plc, on preferential basis.

IIAS Recommendation : FOR

IIAS evaluation parameters for issue of securities Parameters Analysis Risk Level Details Are these being issued to the promoter? No Low Refer table 1 Is the allottee a current shareholder/stakeholder in the company? No Low By how much will the stake of non-promoters get diluted? 10.0% Moderate Has the reasons for fund raising been clearly disclosed by the company? Yes Low Overall Low

Table 1: Issue Details Particulars Result Who are the securities being issued to? Relay B.V. (subsidiary of Diageo Plc.) Security type Equity shares Amount that is proposed to be raised Minimum Rs 20.9 bn1 Has the security been priced correctly Yes, as per SEBI (ICDR) Regulations, 2009 Source: IIAS research 1.Calculated as per minimum price of Rs 1440

USL proposes to issue 14.53 million equity shares to Relay B.V (Relay) on preferential basis. The shares will be issued at a minimum price of Rs 1440 per share (FV Rs 10 each). The pricing will be as per SEBI regulations for preferential issues, SEBI (ICDR) Regulations 2009. The relevant date considered is 30 days prior to date of declaration of postal ballot results (in this case is 14 November 2012).

Relay B.V., a private limited company incorporated in Netherlands, is an indirect wholly owned subsidiary of Diageo plc and is part of the Diageo Group.

Diageo plc is one of the world’s leading premium drinks business selling products in more than 180 markets with a collection of beverage alcohol brands across spirits, beer and wine categories. These brands include Johnnie Walker, Crown Royal, J&B, Buchanan’s, Windsor and Bushmills whiskies, Smiroff Ciroc, Tanqueray and Guinness etc. Diageo is the holding company. For year ended 30 June 2012, Diageo posted a turnover of GB £ 10,975 mn (£ 10,112 mn) and profit after tax of £ 2072 mn (£ 2017 mn).

20 November 2012 United Spirits Ltd. 3 | P a g e

Voting Advisory Table 2: Shareholding Pattern (Pre and Post issue of equity shares) Particulars Existing Shareholding (as on 2 Nov’ 2012) Shareholding post allotment Shares in mn Shares in % Shares in mn Shares in % Vijay Mallaya & group 36.3 27.8 36.3 25.0 cos. Relay (Diageo) 0.0 0.0 14.5 10.0 DII 8.8 6.7 8.8 6.0 FII 58.9 45.1 58.9 40.5 Others 26.8 20.5 26.8 18.5 Total 130.8 100.0 145.3 100.0 Source: Company filings

The objects of the current preferential issue of equity shares are i. Atleast Rs 16.0 bn for repaying debt of the company and its subsidiaries/companies controlled by the company. ,ii. Balance fund to be used for company’s business including as working capital and capital expenditure.

The current promoters, directors and key management personnel of the company shall not be subscribing to the proposed preferential issue.

The proposed deal will be a culmination of three parts:

1. Diageo will buy 14.53 mn equity shares of USL (10% of the enhanced equity capital) by way of preferential allotment of equity share at Rs 1440 per share. 2. The promoters of USL i.e. United Breweries Holding Ltd. (UBHL), Kingfisher Finvest India Ltd. (KFIL) have entered in to a share purchase agreement (SPA) with Relay and Diageo, for the sale of 25.23 mn equity shares (17.36%).

Table 3: Details of share sales by USL promoters Sr. No Seller No of equity shares (in mn) % of equity capital 1. United Breweries (Holdings) Ltd. 9.07 6.24 2. Kingfisher Finvest India Ltd. 7.65 5.26 3. SWEW Benefit Company 0.12 0.09 4. USL Benefit Trust 3.46 2.38 5. Palmer Invesment Group Company 4.38 3.01 6. UB Sports Management Overseas Ltd. 0.55 0.38 Total 25.23 17.36

In case the preferential allotment does not get completed and Diageo holds less than 25.1% in USL, UBHL and KFIL will sell additional equity shares at a price of Rs 1440 per share to take the shareholding in USL to 25.1%.

3. Diageo will make an open offer to the public shareholders to acquire up-to 37.78 mn equity shares (26% of enhanced equity capital) at Rs 1440 per share. The open offer will open on 7 January 2013 and close on 18 January 2013.

Upon the completion of the preferential allotment, SPA and a full acceptance of the open offer, Diageo will hold 53.36% stake in the enhanced equity capital. Vijay Mallaya will retain 14.9% stake and continue to be the chairman of the USL. He will also nominate one representative on the board.

IIAS believes that the transaction might have been the result of the need for UBHL to raise money to meet partly the requirements of group company, Kingfisher Airlines Ltd.

20 November 2012 United Spirits Ltd. 4 | P a g e

Voting Advisory Following the transactions, if Diageo’s stake is less than 50.1%, the share purchase agreement obliges UBHL to vote in favour of all USL resolutions proposed by Diageo for four years.

Separately, Diageo and Vijay Mallya have entered a non-binding memorandum of understanding (MoU) to establish joint venture (50:50) to own United National Breweries. This JV will run a sorghum beer business in South Africa.

We recommend voting FOR the resolution.

20 November 2012 United Spirits Ltd. 5 | P a g e

Voting Advisory Disclaimer

This document has been prepared by Institutional Investor Advisory Services India Limited (IIAS). IIAS is a full service Institutional Shareholder Advisory Service Company. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. IIAS shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any Voting or investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of the individual resolutions which may affect their investment in the securities of companies referred to in this document (including the merits and risks involved). The discussions or views expressed may not be suitable for all investors. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IIAS to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. IIAS reserves the right to make modifications and alterations to this statement as may be required from time to time. However, IIAS is under no obligation to update or keep the information current. Nevertheless, IIAS is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither IIAS nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. . The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. The information provided in these reports remains, unless otherwise stated, the copyright of IIAS. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of IIAS and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.

20 November 2012 United Spirits Ltd. 6 | P a g e