Highway liquor ban to hit 40% outlets, say analysts

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Will lead to de-stocking drive, impact till early next year

The Supreme Court ban on sale of liquor on highways spells bad news for the alcohol industry, as 35% to 40% of outlets are located along highways, according to analysts.

“Our industry checks suggest that the ban has affected 30% to 40% of the outlets. Given the confusion on how this ban would be implemented (whether shops would close/ relocate), retailers have undertaken channel de-stocking, which would weigh on fourth quarter (January-March FY17) sales,” a research report by broking firm IIFL Institutional Equities said. The firm also expects the impact to continue in the first quarter of FY18, as the uncertainty over the issue would continue.

According to a report by HDFC Securities, the Indian alcohol market is valued at ₹40,500-41,500 crore, with volumes at 560-570 million cases. Of this, the Indian-made foreign liquor (IMFL) segment accounts for 70% of the revenues (₹28,500-29,500 crore) and 45-50% of the volumes (270 million cases).

Rohit Chordia and Anand Shah of Kotak Institutional Equities said that the move would drive de-stocking in the near term and will impact volumes in the first quarter of FY18.

However, given this is a channel-level issue and not a demand issue, Kotak expects the impact to be transitory till the shops are relocated and restocked which might take time till third quarter of FY18.

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