Here’s why shares of United Breweries and United Spirits surged up to 5% on Friday

Shares of both United Breweries Ltd. and United Spirits Ltd. surged as much as 7% on Friday, March 6, after the latest set of announcements made by the Karnataka government during the presentation of the state budget.Under the new policy, the Karnataka government has ended its role in fixing liquor prices. Prices will now be deregulated, allowing manufacturers to place their products in slabs based on market competition. In order to simplify the process, the existing 16 pricing slabs have been halved to eight.

The budget also looks to tap into “alcobeer tourism”. Distilleries and breweries will be allowed to host tasting sessions and sell products directly to tourists on their premises.The new policy will also allow Distilleries and breweries to host tasting sessions and sell products directly to tourists on their premises.
“It is definitely a step in the right direction and progressive, we await more details,” United Breweries told CNBC-TV18.Abneesh Roy of Nuvama wrote that the first glance looks very positive as Karnataka is one of the largest states for liquor consumption as 15% of Indian Made Foreign Liquor (IMFL), adding that the industry has also been given time to avoid market disruption.

Nuvama has maintained its “buy” rating on United Spirits, United Breweries and Allied Blenders.

Vinod Giri, Director General of the Brewers Association of India said that any development in Karnataka that is positive, bodes well for the AlcoBev space in the country. He added that 12% of INdia’s total beer volumes come from Karnataka.

Watch full conversation here

Shares of United Spirits are now trading 7% higher on Friday at ₹1,412.9, while those of United Breweries are trading 3.3% higher at ₹1,705.