Indian Liquor Firms Hit by State Tax Hikes, Growth Outlook Dims
Overview
Indian alcoholic beverage companies face headwinds as state policy changes and excise duty hikes curb consumer affordability. Subdued revenue growth is expected for Q3 FY26, impacting major players like United Spirits and United Breweries, while Radico Khaitan shows relative strength. Analysts warn of persistent tax risks undermining premiumization strategies.
Stocks Mentioned
Indian alcoholic beverage companies are bracing for subdued revenue growth in the December quarter, a critical period, due to shifting state policies and escalating taxes.
Policy Headwinds Emerge
Most listed alcobev firms, excluding Radico Khaitan, are forecast to report weaker year-on-year revenue growth for Q3 FY26. Policy changes in Maharashtra are reportedly impacting United Spirits, while delays in restocking may have affected Allied Blenders and Distillers. Analysts at Emkay noted that Maharashtra's liquor policy continues to influence Indian Made Foreign Liquor (IMFL) players.
Consumer Affordability Strained
Low alcohol content beverage sellers, including Sula Vineyards and United Breweries, are also anticipating muted revenue performance. For beer makers, an extended monsoon coupled with excise duty hikes in states like Rajasthan and Karnataka has compounded challenges. Higher taxes have directly translated into increased product prices, creating affordability issues for consumers. JM Financial Institutional Securities highlighted flat sales growth predictions for United Breweries due to muted volumes from the extended monsoon and affordability concerns following duty increases.
Sector Outlook Uncertain
While policy adjustments can be temporary, steep taxes are becoming a persistent industry concern. These hikes can undermine the premiumization strategies of liquor companies, potentially leading to consumer downtrading in various regions. States, eager to boost revenues through alcohol sales, are increasingly imposing higher levies.
Key Variables to Watch
Analysts are closely monitoring future excise duty changes in upcoming state budgets, the ongoing impact of Maharashtra's policy on United Spirits, and the pace of volume recovery for United Breweries. Radico Khaitan is expected to show relatively better performance, aided by sales upticks in Andhra Pradesh. Investors are advised to remain vigilant for further policy shifts and tax increases.
