Shares of liquor companies surged in trade by up to 5% on Thursday as India announced to reduce duty on UK whisky and gin under the Free Trade Agreement (FTA), set to come into force from July 15. Radico Khaitan shares gained more than 4.5% to hit a new 52-week high at ₹3,735 on NSE, while United Spirits also surged more than 4.5% to make an intraday high of ₹1,367.60. As of 2:30 PM, both counters were holding the gains to trade at ₹3,682.50 and ₹1,349, respectively. Around the same time, Globus Spirits (₹896), Tilaknagar Industries (₹435), GM Breweries (₹928), Sula Vineyards (₹159.60), and Associated Alcohol and Breweries (₹837.65) were trading higher in the range of 1 to 3%. The positive sentiment was driven by expectations that the India-UK Free Trade Agreement (FTA) is set to come into effect from July 15, paving the way for significant reduction in import duties on Scotch whisky and gin.
According to analyst estimates reported by CNBC TV18, the duty reduction could translate into significant annual savings for major liquor companies. United Spirits could see annual savings of ₹110-120 crore from the lower duties, while Radico Khaitan may benefit to the tune of ₹70-75 crore. Allied Blenders & Distillers is estimated to save around ₹30-35 crore. Under the agreement, the current 150% import duty on Scotch whisky and gin will be cut to 75% immediately upon implementation, with the tariff then being gradually reduced to 40% over the next 10 years. Industry experts believe this duty reduction could translate into a 5-15% price benefit for consumers, which may help drive volumes in the premium and prestige-and-above (P&A) liquor segments. The stock's PE ratio stands at 50.15 based on TTM earnings ending March 26.
According to the International Spirits and Wines Association of India (ISWAI), which represents leading premium alcoholic beverage companies, India sells over 400 million cases of Indian alcoholic spirits annually, while imported spirits account for only about 2.5% of the total market. Whisky dominates the imported spirits category, with Scotch accounting for around 81% of overall imports of 9.9 million cases. The association noted that nearly 79% of Scotch imported into India is in bulk form and is used by Indian Made Foreign Liquor (IMFL) manufacturers for bottling and blending operations. As per Enrich Money's Ponmudi R, the FTA is structurally positive for India's organised liquor sector, with the reduction in tariffs likely to generate value across the spirits value chain and widen consumer choice. However, he noted that the immediate impact on retail prices is likely to remain limited because state taxes, distribution costs and retail margins continue to form a large portion of the final consumer price.
Market experts are bullish on premium Indian liquor companies with Scotch exposure. Ponmudi R from Enrich Money recommended focusing on companies with strong premium brands and Scotch exposure, with his top picks being Radico Khaitan, United Spirits and Allied Blenders and Distillers. He emphasized that the biggest beneficiaries could be premium Indian liquor companies that use imported Scotch for blending and premiumisation, as lower raw material costs can support margins and help companies expand their premium portfolio. Over the medium to long term, the FTA should accelerate premiumisation rather than disrupt the domestic liquor industry, according to Enrich Money's analysis.
