Shares of several domestic liquor firms, including Radico Khaitan, Som Distilleries and Piccadily Agro, declined by up to 5 percent on May 7, after the finalisation of the India-UK free trade agreement (FTA).
India and the United Kingdom signed the long-pending FTA on May 6. As part of the agreement, the import duty on Scotch whisky and gin — currently at 150 percent — will be reduced to 75 percent immediately and further lowered to 40 percent by the tenth year.
Following the announcement, shares of Som Distilleries and Breweries slipped 5 percent to hit an intraday low of Rs 125.2 on the NSE, before recovering slightly to trade at Rs 128, down 3.45 percent.
Radico Khaitan, which had touched a 52-week high of Rs 2,665 earlier in the day, reversed gains to fall 3.7 percent to Rs 2,443.4. The decline came after two straight sessions of gains.
Brokerage Investec noted that the lower import duty could help Radico Khaitan expand gross margins by over 100 basis points due to reduced costs of bulk Scotch imports. However, the firm also flagged risks to the company’s super-premium portfolio — which contributes around 10 percent of IMFL revenue — as international brands may become more price-competitive, forcing potential pricing adjustments.
Radico markets several popular liquor brands, including Royal Ranthambore, Magic Moments, and 8PM.
Tilaknagar Industries shares fell 3 percent to Rs 273.1. The company is known for brands such as Mansion House, Courrier Napoleon and Blue Lagoon.
Globus Spirits shed 3.22 percent to trade at Rs 953.7, while Associated Alcohols & Breweries slipped 3.07 percent to Rs 1,027.
Piccadily Agro Industries dropped more than 4 percent in early trade but later recovered part of the losses to quote at Rs 530.95, down 2.20 percent on the NSE.
Meanwhile, the Indian alcoholic beverage industry expressed concern over the duty cuts agreed in the FTA.
"We are obviously disappointed with the drop from 150% to 75%. We had recommended a reduction to 100% in the first year, then gradually to 50% over 10 years,” said Iyer, a senior industry executive, in an interview with CNBC-TV18.
Analysts believe increased competition from international labels could impact pricing power and volumes in the premium and super-premium segments.
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