Indian spirits stocks fall as Maharashtra hikes alcohol duties
Indian state Maharashtra has raised the excise duty on Indian-made foreign liquor (IMFL) by up to INR260 (£2.24) per bulk litre, triggering a stock price plummet for key Indian distillers.
The local government announced on Tuesday that it had raised the excise duty on IMFL from three times the declared manufacturing cost to 4.5 times, up to INR260 per bulk litre. IMFL refers to all alcoholic beverages manufactured in India, excluding indigenous alcoholic beverages. The category constitutes a significant portion of India’s alcoholic beverage market and encompasses a wide range of spirits, including whisky, gin, rum, and vodka.
Liquor company shares felt the impact of this blow on Wednesday morning when the markets opened. United Spirits, Allied Blenders and Distillers, Tilaknagar Industries, Radico Khaitan, and Piccadily Agro Industries all saw stocks tumble by up to 7% in early trade yesterday (11 June).
Maharashtra, a state in the western peninsular region of India, is a key market for liquor companies in India, contributing 10-12% of total domestic volume, according to Forbes India. The state is responsible for 20-22% of United Spirits’ domestic sales and 7-8% for Radico Khaitan.
United Spirits, Diageo’s Indian subsidiary, suffered the biggest blow to its shares, which were down 7% in the first hour of trading on Wednesday. The share price of Allied Blenders and Distillers dropped by as much as 6.3%, while Tilaknagar Industries, Radico Khaitan, and Piccadily Agro Industries slid by up to 3%.
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The state government is hoping to tighten control and boost tax revenues from liquor with its sweeping set of reforms. The move is projected to generate an additional INR140 billion (£1.2bn) annually.
It has also hiked the duty on country liquor and imported premium liquor, which are predicted to increase their retail prices by 14% and over 25% respectively.
Maharashtra’s duty hikes are aimed specifically at spirits, with wine and beer exempt from the increases. Maharashtra is home to a large portion of the country’s wineries and a significant number of grape-supplying farmers
The state government has also introduced a new category—Maharashtra-made liquor (MML)—which will be grain-based, to boost its revenue stream.
Retail prices of IMFL products are predicted to rise by 60% as a result of the duty hikes.
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