Liquor Stocks Take a Tumble as TN Mulls Restrictions on Alcohol Sales
Mumbai: Shares of liquor makers tumbled after Tamil Nadu considered restrictions on alcohol sales in the state on the heels of a ban by Bihar. Analysts said investors are worried that other states, which are poll-bound, may resort to similar actions that may hit volume growth.
United Spirits (USL), the world’s second-largest spirits company by volume, fell over 4% to end at ₹ 2 , 2 6 0 . 4 0 o n Monday. United Breweries dropped 0.25% to close at ₹ 20.35. Pioneer Distilleries, a subsidiary of USL, slid 4.99% to ₹ 148.55 while Associated Alcohol and Breweries declined 3.82% to close at ₹ 80.6. Empee Distilleries was the worst hit with shares tumbling over 9% to ₹ 58 on Monday.
With the Tamil Nadu assembly elections next month, Chief Minister J Jayalalithaa promised to implement prohibition in a phased manner if her party was given a second term, while the DMK declared total prohibition in its election manifesto.
“This trend of banning liquor is go- ing to continue and we suspect that more and more States will use it for political gains,” said an analyst with a foreign brokerage on condition of anonymity.
Bihar called for a blanket ban on the sale and consumption of alcohol from April 1. Market players say that while Bihar is estimated to make up about 1-2% of the liquor consumers, Tamil Nadu is expected to have over 3-4% of the liquor consuming population. A ban in Tamil Nadu could dent liquor companies significantly, said analysts. However, there are others who view this as a good opportunity to pick up these stocks. “The market for these companies is large enough and the demand for their products is pretty inelastic,” said Sandeep Nayak, CEO, Centrum Broking.