SDL specializes in production of extra neutral alcohol (ENA), a key raw material for spirits, using both molasses and grain.
Vijay Mallya, UB Group chairman said, "Increasing self reliance in extra neutral alcohol, which is the core raw material for our business, is our highest priority. The acquisition of an equity stake in Sovereign Distilleries is a significant step forward in this direction".
The company claims that with this investment, "USL has attained 35% self-sufficiency in its projected total liquid requirement, the company said. The company is targeting 50% self-reliance in ENA by 2013."
United Spirits has outlined an investment strategy to increase its supply side security last year with a capital expenditure of Rs 1,100 crore that included acquisitions and upgrade of units.
The company has already acquired additional ENA capacity through acquisitions of Andhara Pradesh based Tern Distilleries and Maharashtra based Pioneer Distilleries. The company said these moves would also enable USL to capture the distillation margin and thereby reduce the overall landed cost of raw material.
United Spirits volumes have grown by 12% in FY2011," said VK Rekhi, USL's President & Managing Director. He further added, "This strategic investment augurs extremely well for our expansion plans, as well as for our continuing endeavours to improve our margins."