Share price of liquor manufacturers majors United Spirits and Radico Khaitan plunged on Thursday after reports that Bihar has banned sale of alcohol in the state with effect from April 1, 2016. Bihar has a population of around 100 million, more than Germany’s.
United Spirits slid 4.73 per cent to Rs 3211.45 on BSE, while the share price of Radico Khaitan declined 6.92 per cent to Rs 114.25.
Investors speculate that more states may follow Bihar’s move. Consumption of alcohol is already prohibited in the states of Gujarat, Kerala, Manipur, and Nagaland.
Bihar chief minister made the announcement — a part of his election pledge — at an official function to mark Prohibition Day. The move can cost Bihar Rs 3400 crore in tax revenue.
Nitish Kumar had earlier promised voters to restrict opening of liquor shops in villages. According to annual report of United Spirits, the company has a plant at Hathidah in Bihar.
“More than the obvious financial impact, this is a directional negative if rest of the state governments emulate Bihar and Kerala, in our view,” analysts at brokerage house Motilal Oswal said.
The report comes at a time when India is now a hotly contested market for global drinks makers like Diageo and Pernod Ricard.
The benchmark BSE Sensex on Thursday closed 183 points up at over two-week high of 25,958.63 as investors lapped up realty, auto and metal stocks amid hopes of a breakthrough on GST Bill in Parliament and mixed cues from global markets.
(With inputs from agencies)