On Tuesday, the excise department of the Delhi government rejected French spirits major Pernod Ricard’s application to renew its liquor sale licence, citing ongoing investigations into the company.
The order cited several allegations, including that Pernod made illegal profits by giving false price information and financially supported retailers in exchange for stocking more of its brands in violation of rules.
Pernod, the maker of Chivas Regal, denied any wrongdoing and said that it would challenge the Delhi government’s order in court.
Macquarie said that the benefit of the absence of Pernod from the lucrative Delhi market may take some time to flow through to United Spirits.
The brokerage sees risks to near-term margins for United Spirits, given continued inflationary headwinds on input costs, limited room to cut overhead costs and back-ended gains from the proposed manufacturing restructuring.
United Spirits, a Diageo-promoted company, is the largest alcohol beverage company in India. The company manufactures, sells and distributes a portfolio of premium brands such as Johnnie Walker, Black Dog, Signature, Royal Challenge, McDowell's No1, among others.
Shares of United Spirits are trading 1.3 percent lower at Rs 765. The stock is down 12 percent on a year-to-date basis.
