United Spirits Faces Buzzkill As Brokerages Mark Maharashtra Excise Duty Hike Headwind
Both Macquarie and Goldman Sachs flagged this move as a near-term headwind for United Spirits, which derives about 15% of its revenue from Maharashtra.
Maharashtra's decision to sharply increase excise duties on liquor has left analyst sentiment conflicted on United Spirits Ltd., India's largest liquor company. On June 10, the state raised the excise duty on Indian Made Foreign Liquor and country liquor from 3 times to 4.5 times of manufacturing cost, marking a steep 50% hike.
The new duty structure, part of a plan to generate Rs 14,000 crore in additional revenue, also introduced a new category—Maharashtra Made Liquor, that's expected to have a more relaxed tax regime to promote local production.
Both Macquarie and Goldman Sachs flagged this move as a near-term headwind for United Spirits, which derives about 15% of its revenue from Maharashtra. Macquarie continues to rate the stock as 'underperform', citing concerns over the likelihood of volume contraction due to price elasticity. The brokerage has a price target of Rs 1,592, marking a 1% downside from the current levels, while Goldman Sach's 'buy' rating and price target of Rs 1,700 reflects a 5% upside.
"We estimate that manufacturing price accounts for around 10% of consumer retail price for economy-end brands," Macquarie noted, adding that the new duty could translate into an over 15% retail price hike.
Goldman Sachs echoed these sentiments, estimating a potential 20–30% surge in consumer prices and a corresponding drop in sales as consumers may downgrade or shift to cheaper alternatives. "The impact could be especially felt across United Spirits' lower-end portfolio," the firm said, highlighting the elasticity at play.
There may be a silver lining. Macquarie pointed out that in Karnataka, a past tax hike was eventually rolled back after collections fell. This isn't the first time Maharashtra has stirred the spirits industry. Goldman Sachs points out how in 2019, a similar excise hike led United Spirits to raise prices by 15%, which dented margins but didn't materially impact growth due to product mix management. This time around, both brokerages are waiting for finer print on how the tax hike will apply across premium versus mass-market brands, especially since 30% of USL’s revenue comes from bottled-in-origin and bottled-in-India scotch.
