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Alit Hide can be obtained from killing an Alit.
By speaking to either Tendris Vedran or Anarenen, both alchemists, the Nerevarine will learn the following about Alit Hides: "The tough hide of the wild Alit makes a serviceable multi-purpose leather. Ashlanders hunt the alit and use their tanned hides as trade goods." 
The following people sell this item.
The item can be found at the following locations: