Investigation into Pernod Ricard and Diageo
Pernod Ricard and Diageo are being investigated in India for allegedly misclassifying bulk Scotch imports. This was done to benefit from lower tariffs under the India-UK trade deal. The inquiry began after a new trade agreement took effect on July 15. This agreement reduced import duties on certain Scotch products from 150% to 75%. Tax officials are looking into whether the companies qualify for this duty relief. They are particularly focused on bulk Scotch concentrates used in popular brands like Royal Stag and Blenders Pride.
The UK makes up nearly 75% of India's imported spirits market, mainly driven by Scotch whisky, according to Crisil Ratings. The British government reported that its whisky exports to India were worth over £200 million in 2022. After the trade deal, liquor companies are hopeful for increased consumer spending on imported spirits, especially during festive seasons. Weddings and festivals reportedly account for 15–20% of William Grant & Sons' business in India. This has led companies to create premium gift packs to attract wealthy consumers.
Last week, tax inspectors visited Pernod Ricard's headquarters near New Delhi. They questioned executives about their Scotch imports. Diageo's Indian unit, United Spirits, confirmed that its offices were searched as part of a broader industry investigation by authorities. Both companies have said they are cooperating with the Directorate of Revenue Intelligence.
The investigation could affect the stock prices of Pernod Ricard and Diageo. Investors are assessing the potential financial impact of the tax probe. Changes in import duties may also influence pricing strategies in the Indian spirits market, especially for Scotch whisky.
Investors will be watching for updates on the tax investigation. They are also looking for any regulatory changes that may come from this ongoing scrutiny.
Based on reporting by: moneycontrol.com, livemint.com