United Spirits To Feel Short-Term Pain From Liquor Ban, Say Brokerages
Shares of India's largest liquor company United Spirits Ltd. fell 5.9 percent on Monday as investors reacted to the Supreme Court's decision to uphold a ban on the sale of alcohol in hotels and restaurants along national highways.
Most brokerage houses have decided to hold on to their stock calls for now, with SBICAP Securities Ltd. recommending that a “correction of nearly 10 percent” could be an opportunity to buy. The brokerage said while the apex court's order will result in a steep decline in volumes and a possible downside of 10-20 percent to financial year 2017-18's estimates, a gradual recovery can be expected from the second half. The brokerage retained a ‘buy' rating for United Spirits and a ‘sell' rating on United Breweries Ltd.
The brokerage said that decisions like de-notifying state highways can reduce the impact on the volumes.
Jefferies, which had an ‘underperform' rating on United Spirits, said its too early to gauge the extent of the impact, but its bound to dent demand in the short term.
Morgan Stanley too said the ban its bound to have a near-term impact on United Spirits' demand, but stopped short of changing its rating or target price.
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