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Hospitality services of India are left clamoring in light of Supreme Court edict. The landmark edict from the apex court of India bans sale of alcohol on highways. The edict hopes to ensure safety on roads and curb drunk driving. While no one doubts the noble intentions of the apex court of India.
The ban is sure to impact the economy of the country. The ban will largely hamper the dining scene in India which was on the cusp of turning world class.The ban hits the liquor companies and the services sector of India alike.
As a reflex action of the ban, top brokerage firms of India downgraded ratings of the liquor companies. Similar consensus was seen by individual investors in the market. The United Spirits on April 4th 2017, shed a colossal 5.76% to close at 2048.30. RadicoKhaitaan, another liquor company fell 3.09%.
The United Breweries shares fell 0.96% and closed at 763.15. An estimate suggests that 35-40% of the liquor outlets are along highways. With these establishments decommissioned, the investor are wary and maintaining a cautious attitude towards the companies.
The experts have further stated to divest one’s investment in the sector. The experts cited the government’s staunch stance towards the industry while arriving at the conclusion. The damage to the sector will continue for at least a year according to the experts.
The impending GST reform will further add to the woes of the industry. The commodity does not fall under the ambit of the tax reform. This means it incur the same excise and vat it currently is subjected to. This rate too is expected to shoot up and the price will further increase.
The services sector stands to lose one million jobs to the ban. The revenue losses too are expected to mount. An All India Wine Producers Association (AIWPA) calculation suggests an initial loss of at least INR 120 crores. The sales are expected to be affected by 20%. The wine industry caters to the niche and privileged class of India.
The consumers of this commodity are often found at upscale establishments. These upscale establishments covet the prime area around the cities. This area is generally considered to be in and around the motorways of the cities. These areas are prime due to their accessibility and away from the ambient noises of the cities. With this edict in place, such establishments stand to lose their niche clientele. The alcohol served in these establishments is a major revenue source in the country.
About 30% of the population of India are moderate to heavy drinkers. The industry patrons in response to the edict were seen imploring the judiciary body. They were asking the body to refrain from considering liquor vendors as the same as upscale bars and restaurants. The restaurant owners were quoted saying that a restaurant is a highly regulated space.
The drinks in a restaurant were enjoyed responsibly with friends and family. The recent rise in the Indian economy has seen a rise in the purchasing power of individuals as well. The citizens of the country now have extra cash to splurge. These funds are then diverted to pursuing a leisure lifestyle.
The fine wining and dining, is one such avenue of the services sector that survives on this change.Not all of the restaurant goers are looking to get sloshed. Nor are they inclined to get in a car drunk and run over people. The owners of these establishments cited the need for this outlook to change.
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