Motilal Oswal has come out with its report on liquor stocks. According to the domestic brokerage house, the sector is entering a transition phase. This is driven largely by regulatory shifts in key markets like Karnataka, which could impact pricing, demand trends, and company strategies.
In the Motilal Oswal report, one stock clearly stands out as their preferred pick in the space.
Let’s take a look at stocks that the brokerage is bullish on and the outlook towards the sector –
Motilal Oswal on Alcobev sector: Key stocks to watch
Among the stocks under coverage, Motilal Oswal has highlighted Radico Khaitan as its preferred pick.
According to the brokerage report, “Radico Khaitan remains our preferred name in the liquor space.”
The brokerage has given a ‘Buy’ rating on the stock with a target price of Rs 3,850, indicating potential upside 20% from current levels.
On the other hand, United Spirits and United Breweries have been assigned ‘Neutral’ ratings.
Motilal Oswal on changing dynamics in alcohol sector
Motilal Oswal, in its report, noted that the Karnataka government’s draft excise policy announced in March 2026 is a key development that could influence the sector going forward.
The report noted, “The revised excise framework marks several changes to Karnataka’s alcohol taxation, including the implementation of an Alcohol-in-Beverage (AIB) tax system.”
This means that liquor will now be taxed based on how much alcohol content it has, rather than just its price.
Another key change highlighted in the report is the introduction of a uniform tax structure. As per the Motilal Oswal, “the policy introduces a standardized excise rate of Rs 1,000 per liter of pure alcohol for retail channels across IMFL (Indian Made Foreign Liquor) and beer.”
Importance of Karnataka market for liquor companies
The brokerage report pointed out that Karnataka is a significant market for liquor companies. It contributes meaningfully to overall volumes and revenues.
As per the Motilal Oswal report, the state accounts for nearly 65 to 70 million cases annually, which is about 15% of the total IMFL industry.
For companies like Radico Khaitan, United Spirits, and United Breweries, Karnataka contributes around 7-8% of their business, while for United Breweries, the share is even higher at about 12%.
Alcobev sector: Possible impact of draft Karnataka liquor policy
According to the Motilal Oswal report, the proposed tax system in Karnataka could lead to a mixed impact on pricing across segments.
It noted, “We expect MRP reduction in the range of 10-20% across P&A offerings in Karnataka.”
At the same time, lower-priced or mass-market products could see price increases. The report further added that “lower-priced brands are expected to witness sharp price hikes due to the consolidation of slabs (10-20% price hikes).”
This in simple terms means that premium products could become relatively more affordable, while cheaper products may become costlier.
The brokerage also highlighted that the premium segment is already growing strongly. As per the report, premium products grew by around 30% in FY26, while the regular segment declined by about 5%.
What does the draft Karnataka policy mean for beer companies?
The impact is not limited to spirits alone. Beer companies are also expected to see changes under the new policy.
The report noted, “we expect mild beer to see price cuts (~10%), while strong beer may witness price hikes of 5-15%.”
What investor need to watch
Motilal Oswal believes that the structural changes in the industry, especially the shift towards premiumisation, will benefit companies with strong premium portfolios.
The report also pointed out that companies may adapt their strategies to navigate the new tax system. For instance, “companies may opt to reduce alcohol content to maintain pricing and protect market share.”
In addition to this, the move towards content-based taxation is seen as a long-term positive. The report added that the new framework is “more aligned with global practices and is expected to improve rationality and long-term demand stability in the beer category.”
Disclaimer: The investment information and target prices mentioned above are based on a report by Motilal Oswal and are intended for informational purposes only. This does not constitute an offer or solicitation to buy or sell any securities. Given the market volatility and regulatory shifts in the liquor sector, readers are strongly advised to consult with a SEBI-registered investment advisor before making any financial decisions.
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