Liquor Stocks Take a Tum­ble as TN Mulls Re­stric­tions on Al­co­hol Sales

The Economic Times - - Smart -

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.

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