In a major policy move, the Maharashtra Cabinet has approved a significant increase in excise duties on liquor, marking the steepest hike since 2011. This decision is expected to have widespread implications for Indian Made Foreign Liquor (IMFL) and country liquor companies operating in the state. The most notable aspect of this hike is the 50–60% increase in excise duty on IMFL and a raise in country liquor duty from ₹180 to ₹205 per proof litre. This will substantially increase consumer prices across various liquor categories.
For consumers, the price hike translates to noticeable increases. A 180ml bottle of country liquor, earlier priced at ₹70, will now cost ₹80. IMFL bottles that used to retail between ₹120–₹150 will now be priced around ₹205. Premium foreign liquor, which was previously priced at ₹210, will see a jump to ₹230–₹360 depending on the brand and quality. Interestingly, beer and wine have been excluded from this excise revision, providing some relief to players focused solely on these segments.
This policy change also has an underlying motive—to promote liquor manufacturing within Maharashtra. By incentivizing local production, the state appears to be aiming for both revenue augmentation and regional economic development.
The stock market reacted immediately to this news, with noticeable movements in liquor-related stocks. Companies with higher exposure to IMFL and operations in Maharashtra witnessed selling pressure, while others benefited from either exemption or local manufacturing advantages. United Spirits, for instance, took a significant hit. With nearly 20–22% of its revenue coming from Maharashtra, analysts estimate that the company could see a 6–8% decline in EPS due to a projected 20% volume drop in the state. This translated into visible weakness in the stock.
Similarly, Radico Khaitan, which derives about 7–8% of its revenues from Maharashtra, is likely to witness a 2–3% hit on its earnings. Given that it primarily focuses on IMFL, the company will face challenges in passing on the full cost increase to consumers, especially in the price-sensitive segments. Blenders Pride, under Pernod Ricard, is also likely to experience margin pressure, particularly in the premium segment, where volume elasticity is a concern.
On the other hand, some companies emerged as beneficiaries of the new policy. GM Breweries saw investor interest rise because it is a dominant player in Maharashtra’s country liquor segment. With the government’s intent to promote locally manufactured liquor, GM Breweries stands to gain. Som Distilleries, although a market leader in Madhya Pradesh, also benefitted from positive sentiment as it aligns with the trend favoring domestic liquor manufacturing.
Sula Vineyards also emerged unscathed, as wine was exempt from the excise hike. This exemption allowed Sula to maintain price stability, making it an attractive option for investors looking at steady consumption-driven stories in the alcohol space. United Breweries, too, found favor as beer was left out of the policy change. This may even lead to some demand shift from IMFL to beer due to the rising cost of spirits.
Brokerage houses have also weighed in on the situation. They estimate that the 50–60% duty hike on IMFL could lead to a 30–50% increase in retail prices. While this may hit luxury liquor volumes, companies with strong brands and diversified portfolios may still hold ground. However, for players like United Spirits and Radico Khaitan, where Maharashtra contributes significantly to their topline, the short-term headwinds could be intense.
Disclaimer:
This content is for informational purposes only and not intended as investment advice. Readers are advised to consult with financial professionals before making any investment decisions. Market conditions and company performances are subject to change.
