Shares of two liquor makers, United SpiritsBSE -1.56 % and United Breweries , fell on Wednesday as investors became jittery ahead of Tamil Nadu election results. The expectation that DMK will come to power in the State made investors nervous as the party has promised a complete ban on alcohol in its election manifesto.
United Spirits (USL), the world’s second-largest spirits company by volume, fell over 3% to end at Rs 2,541.05 on Wednesday. United Breweries dropped almost 2% to close at Rs 733.10. Other liquor makers, such as Pioneer Distilleries (a subsidiary of USL), Associated Alcohol and Breweries and Empee Distilleries, all rose between 1% and 5% on the same day.
Analysts feel that this could be because these are relatively smaller companies. However, they warn that prohibition will not spare any company.
“Prohibition looks like it is on the cards if the DMK wins,” said Abneesh Roy, associate director at Edelweiss Capital. “But the timeline for the prohibition and the kind of liquor that is going to be banned is awaited. Apart from the Tamil Nadu election results, another factor that is causing concern is the talk of Maharashtra cutting water supply to liquor companies,” Roy said.
His top pick is United Spirits. In April, the Aurangabad bench of Bombay High Court ordered the Maharash ..
Some feel that it is too early to take a call on these stocks. “We’ll have to wait for the results,” said Gautam Duggad, head of research – institutional equities, Motilal Oswal Financial Services. “It is tough to comment on whether the proposed restrictions will have an impact unless there is clarity on how prohibition is going to be achieved — whether through a staggered or a blanket ban.” Even with these setbacks, analysts feel United Spirits is an attractive bet. “We have a positive outlook on United Spirits as it is the leader and the industry is placed favourably on a long term basis,” said Duggad.