A liquor ban in Andhra Pradesh will have only a limited impact on listed companies United Spirits (USL), United Breweries (UBL) and Radico Khaitan as the southern state contributes 4-6 per cent of sales of large companies and a smaller share of profit, according to analysts.
Andhra Pradesh accounts for 8 per cent of overall Beer sales and about 10 per cent of Indian-made foreign liquor (IMFL) volumes. Domestic brokerage Emkay Global has maintained its FY20/21 EPS estimates and buy rating for UBL and a hold on USL.
“UBL / USP have sales contribution of 6 percent / 4 percent from the state and a lower profit contribution due to lower product realizations and higher share of popular spirits,” said Ashit Desai, an analyst at Emkay Global. “USL’s popular business is franchised in the state and hence, the overall impact on sales/profit is low. We believe Q3 volumes will be affected 2-3 per cent but expect a recovery from Q4 as the trade stabilises.”
With consumers already holding back on spending, the AP government’s latest move to cancel all bar licences in the state and phase in prohibition were expected to hurt liquor companies. However, staggered implementation of the ban and exemptions for certain categories of hotels would help cushion the impact, said analysts.