Liquor stocks fall after Madhya Pradesh proposes ban

Madhya Pradesh accounts for only 3-4% of liquor sales

Liquor stocks fell by as much as seven per cent on Monday after Madhya Pradesh (MP) proposed to close all liquor shops in the state in a phased manner. "Alcohol prohibition will be implemented in the entire state by closing all liquor shops in a phased manner," MP Chief Minister Shivraj Singh Chouhan said on Sunday at a programme. Shares of Radico Khaitan fell 7.3 per cent, United Spirits dropped 6.6 per cent and Globus Spirits fell 4.9 per cent. 

“In the first phase, the state government closed all the shops falling within a radius of five km from the banks of the Narmada on either side. In the next phase, the liquor shops would not be allowed to open in residential localities, near educational institutes or religious places,” he said.

Although MP accounts for only three-four per cent of liquor sales, investors were worried about a similar ban in other states, said analysts.

“The real impact of the move can be assessed once there is a formal communication from the government,” said Abneesh Roy, senior vice-president at Edelweiss Financial Services. “MP is a BJP-controlled state; the Street is worried that other BJP states might follow suit.”

Last year, Kerala and Bihar had announced similar moves. Kerala had announced it will enforce prohibition over 10 years, by shutting down 10 per cent of liquor outlets every year. Bihar, too, said it will begin phased prohibition. 

More recently, the Supreme Court imposed a ban on establishments selling alcohol along 500 metres of all state and national highways.
 

Analysts are already beginning to see an impact on revenues and profitability due to the bans in various states.