RCB sale: Nuvama retains Buy on United Spirits, says one-time dividend likely

Nuvama Institutional Equities said on Wednesday that United Spirits Ltd’s decision to fully exit its Royal Challengers Bangalore stake (RCSPL) for Rs 16,660 crore was in line with Street expectations.

The domestic brokerage said the transaction removed a key overhang for the company and unlocked significant capital from a low-contribution asset, which could sharpen its focus on core alcobev operations. "It sets a strong valuation benchmark for IPL franchises, implying potential upside for other listed franchise owners such as SUN TV (SRH) and RPSG Ventures (LSG)," it said.

On Tuesday, United Spirits said it will divest its entire stake in RCSPL to a consortium led by Aditya Birla Group, Times Group, Blackstone and Bolt Ventures. The deal is likely to close in six months, subject to regulatory approvals. Post completion, RCSPL will cease to be a subsidiary.

Nuvama expects one-time dividend post approval, in six months, supporting shareholder returns. Overall, the transaction is value accretive, it said adding that it would improve capital allocation, return ratios and bring strategic clarity. For now, the brokearge suggested a 12-month target price of Rs 1,660 on the stock.

Nuvama said the effective deal valuation is higher at over Rs 18,200 crore, including Rs 540 crore WPL liability and Rs 980 crore BCCI fees and GST to be borne by buyer. "RCSPL contributed Rs 504 crore revenue (1.9 per cent of standalone sales) and Rs 321 crore net worth (4.1 per cent) to United Spirits in FY25. Despite its strong brand value, the business had limited financial contribution, making the exit highly value accretive. The transaction unlocks significant capital and can be redeployed more efficiently on core operations or returned to shareholders," it said.

Nuvama said the $1.8 billion RCB deal has set a new benchmark for IPL franchise valuation, implying more than 2 times valuation for Gujarat Titans at $900 million and above Rajasthan Royals’s recent $1.6 billion valuation. This reflects a sharp re-rating of IPL assets, with franchise value increasing 25 times since inception in 2008, supported by strong global investor interest from private equity and US sports owners.

For United Spirits, the near term outlook remains soft with Q4FY26 impacted by Maharashtra taxation changes. However, the outlook improves from FY27 with UK FTA benefits (from Q2FY27) likely lowering scotch costs, while easing crude supports lower input costs (glass, ENA) and margin expansion, Nuvama said.
 
"We view the exit as strategically positive, as ownership of sports franchise offers limited synergy for a consumer liquor company. Brand visibility can be effectively maintained through sponsorship without capital lock-in. The move allows UNSP to sharpen its focus on premiumisation, margin expansion and core category growth in the alcobev sector," it said.