While announcing the state’s budget earlier this month, Karnataka Chief Minister Siddaramaiah proposed a major overhaul of the Karnataka Excise Act, shifting to a global taxation standard and deregulation of alcohol pricing, meaning that the government will no longer fix prices. According to the draft excise policy, the state may shift to an alcohol-in-beverage (AIB) excise structure and may reverse aggressive duty hikes that had hit beer volumes 20-25% in calendar year 2025.
Liquor was earlier taxed based on content benchmarked to global standards rather than the exact alcohol content. While announcing the state Budget for the year 2026, Chief Minister Siddaramaiah proposed to revise this system and change it to the actual alcohol content present in the final product rather than the total volume, with the transition being phased over 3-4 years.
Under the new framework, tax rates will be determined by the alcohol content of each beverage rather than broader global classifications. The revised structure is scheduled to take effect from April 2026.
‘Very positive’ for United Breweries
Elara Capital said that these changes are “very positive” for United Breweries as prices are expected to correct 25-30% in the economy segment. “At our base case of 25% volume growth in Karnataka , we estimate 3%/7% revenue and EPS uplift for UBL,” the domestic brokerage said.
Karnataka accounts for approximately 13% of India’s beer consumption, but the state’s aggressive duty hikes on beer post COVID-19 (three increases in under two years, pushing AED from 175% to 205%) severely backfired and led to beer volumes contracting 20-25% in 2025, which in turn affected excise revenues of the state. “To arrest this drop, the government has now overhauled its taxation framework, shifting to an alcohol-in-beverage (AIB) based excise structure. As per our primary checks, the detailed taxation framework is expected to be notified by the end of this week or early next week,” it added.
The new excise policy will have an asymmetric impact, according to Elara, which said that economy beer is set for the sharpest correction. “We expect a 25-30% price reduction in regular/economy brands. This is crucial as the economy segment is the volume engine of Karnataka’s beer market. UBBL commands ~45% market share in this segment. We estimate beer volume in the economy segment to grow ~30-45% from the current base and the overall beer category to grow 25%,” the brokerage added.
Karnataka, being a high-margin state, operates at a premium state-level realisation and gross margin, as per Elara, which added, “At our base case, expect 25% volume growth, and ~6 mn cases volume delta (2.7% uplift) , ~ Rs 3.4bn additional revenue (3.2% topline uplift), resulting in ~Rs 505 mn PAT (c.6.7% EPS uplift ). We assume UBBL will maintain its share in the state.”
United Breweries target price
Elara upgraded its rating on the shares of United Breweries to ‘Accumulate’ from ‘Reduce’, and increased its target price to Rs 1,900 per share, from Rs 1,700 apiece. The latest target price implies an upside potential of more than 17% from the stock’s previous closing price of Rs 1,618 apiece on NSE.
United Breweries shares have fallen 3% on Thursday to trade at around Rs 1,576 apiece, as seen at 1.45 pm. The stock has fallen more than 4% in one week.
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