The country’s largest liquor maker United Spirits is expected to take a major hit with the Supreme Court on Friday upholding the ban on liquor vends along National and State highways.

United Spirits’ volumes are expected to reduce by a third following the ban. A report from brokerage firm CLSA said that the ban on sale of liquor within 500 metres of the highways could impact nearly one-third of USL volumes. The brokerage firm also downgraded the USL stocks from “underperform’’ to “sell’’.

On Friday, the Supreme Court while upholding the ban, said it has been extended not just to retail liquor outlets but also to bars, pubs and restaurants located on highways. It said these establishments cannot be exempted as this would mean a dilution of its object of preventing drunk driving, which the court pointed out, is one of the major killers plaguing Indian roads.

According to a report in The Hindu , Justice DY Chandrachud, who wrote the original judgment on December 15, 2016, clarified in a short order that the object of the court's direction to remove “liquor vends” located within 500 m distance of national, State highways, associated roads and service lanes, was to end drunk driving and no such relaxation ought to be given to establishments such as pubs, bars and restaurants.

The report also said that while in certain States, the deadline for the ban has been extended, the court dismissed Tamil Nadu’s request to reduce the no-liquor zone from 500 metres to 100 metres and held that the ban will start from April 1 itself.

Key variable The Indian spirits market is worth about $17 billion and its per capita consumption is about 1.4 litres which is expected to grow to 1.8 litres in 2019, according to research firm Euromonitor.

Anand Kripalu, CEO of United Spirits which owns nearly 40 per cent of the market, in an earnings conference call in January this year, said the ban is going to be a key variable for the forward period and “it is something that we are watching very closely.” He further added that liquor stores will need to be closed on highways and move 500 metres from the highway. “I think the critical part is going to be how we manage this transition period. The devil is in the detail, you need to solve on outlet by outlet basis, like which outlet is going to close or where the new outlet is going to be relocated. You need to kind of micro-analyze and build a mitigation plan and our teams are focused on trying to make sure we have that clarity before April 1,” he said.

Deepak Roy, Executive Vice-Chairman and CEO of Allied Blenders & Distillers, said it will affect 40 per cent of the total liquor vends in the country. But, the impact will be short lived and after three months, business will be normal, Roy said. “It will give an opportunity for bootleggers to get into the act and start selling liquor illegally,” he said.

For the entire industry, the impact could be between 10 per cent and 15 per cent on the topline, Roy said. Allied Blenders & Distillers’ flagship brand, Officer’s Choice is the largest selling whisky in the world.

The USL scrip fell nearly 1 per cent to close at ₹2,175.

Related Topics
comment COMMENT NOW