Moneycontrol
Mar 16, 2017 09:08 AM IST | Source: Moneycontrol.com

Karnataka Budget impact: Here’s what Goldman Sachs feels about United Spirits

Research firm feels the company will have to raise prices by 2-4 percent across brands to maintain realisation before margin, but volumes could take a hit.

 
 
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Investors cheered liquor stocks on Wednesday after the Karnataka government announced lifting of a few taxes in its Budget.

The announcement sent major liquor stocks soaring between 3 and 6 percent intraday on Wednesday, with United Spirits closing over a percent higher.

Goldman Sachs believes United Spirits will have to raise prices by 2-4 percent across key brands to maintain its realisation before trade margin. However, it sees volumes taking a hit on the back of this price increase.

The state government on Wednesday announced the removal of VAT of 5.5 percent, but increased additional excise duty to 16 percent in the on-trade channel. Meanwhile, in case of an off-trade channel, the VAT remains the same.

Supermarkets and wine shops, among others constitute the off-trade channel, while outlets such as restaurants, bars, pubs are a part of the on-trade channel.
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