Shares of liquor companies fell between 4% and 6% on Monday after Madhya Pradesh chief minister Shivraj Singh Chouhan announced that all liquor shops would be closed in the state in a phased manner. Leading the pack was United Spirits, which fell by 6.59% and ended the session at Rs 1,888.65. The stock of United Breweries, which is engaged in sale and manufacturing of beer declined 3.42% and ended the day at Rs 744. Radico Khaitan fell by 7.30%.
Liquor stocks have fallen in the previous seven sessions after the Supreme Court on March 31 clarified that there will be no liquor sale in hotels and restaurants or liquor outlets within 500 metres of the state and national highways. The court further said the ban will be within 220 metre of the highway in towns with population below 20,000.
The stocks of liquor companies have fallen between 3% to 16% in the past seven trading sessions.
Market participants said the ruling will impact volumes in the first quarter of FY18 as 35-40% of liquor outlets are located along national or state highways and will have to shut shop.
You may also like to watch:
AK Prabhakar, head of research at IDBI Capital, said it is better to stay away from buying liquor stocks as many states are moving towards imposing prohibition. “Kerala, which has one of the highest liquor consumption in India, took the lead to implement a phased ban, followed by Bihar, and now Madhya Pradesh has come with this proposal. This is not a good sign for liquor companies,” he said.
Chouhan’s announcement came after several protests against liquor shops were reported from across the state in the last one month. Protesters had burnt two vehicles and damaged four others in Bareli town of Raisen district on Wednesday when the excise department was trying to shift liquor shops from a highway to a local residential colony.
The apex court’s orders came after more than nine states and Union Territories sought a review of the court’s ruling. On December 15, 2016, a bench of the Supreme Court bench had allowed liquor shops in proximity to highways to operate until March 31 but ruled against renewal of their licences.