India: Heineken Singapore arm, Asia Pacific Breweries, could be interested in acquiring 76% stake in Lilasons Breweries

Asia Pacific Breweries (APB), the Singapore-based arm of Heineken, has initiated discussions for acquiring substantial interests in Lilasons Breweries, one of the last Indian surviving independent brewers, The Economic Times of India posted October 24.

Sources said APB, which acquired majority interests in Vijay Chougule's beer business for $18 million earlier this year, has valued the privately-held Lilasons at around Rs 240 crore in the early talks. Lilasons owns a popular regional strong beer brand, Khajuraho, which sells over 2 million cases and has two breweries in Madhya Pradesh and in Maharashtra.

When contacted, sources at Lilasons confirmed APB's stake offer. "We are assessing the situation and are not in a hurry," they added. APB's business development director, Vivek Chhabra, said he was not aware of any such move. It must be mentioned that leading domestic brewer United Breweries (UB) and SABMiller had made buyout proposals to the Lilasons' promoter family in the past. Khajuraho beer, which in many ways heralded the strong beer phenomenon in India, currently mops up volume mainly from Maharashtra and MP.

The brand, which once had a national presence, still carries latent equity, and the APB move could once again heighten interest in it. In context, it must be mentioned that the growing Indian market has been attracting unprecedented attention from global beer giants like Carlsberg and Budweiser, which are set to unveil their India plans shortly.

Sources said APB could be interested in acquiring 76% stake in Lilasons Breweries or could look at floating a JV into which the latter may transfer the branded assets. The second arrangement would also mean APB bottling Khajuraho beer at its other brewing plants. Sources said a direct buy into Lilasons may pose problems of overlapping in manufacturing for APB.

Mr Chougule's beer business has provided APB with manufacturing presence in Aurangabad, and a direct share purchase in Lilasons will see it end up with another one in the same city. Sources said APB has been on the prowl to expand its brewery footprint outside Maharashtra, and has been looking at smaller players for acquisitions or contract bottling arrangements.

APB has had fairly advanced negotiations for acquiring a stake in Mount Shivalik Group. But talks ended in a deadlock over valuation issues, as volume growth has prompted smaller brewers to ask for significantly higher prices.