Catch sight of drunkard embracing Penny (4)
I believe the answer is:
spot
'catch sight of' is the definition.
(to spot is to notice or catch sight of)
'drunkard embracing penny' is the wordplay.
'drunkard' becomes 'sot' (sot can mean a drunken person).
'embracing' is an insertion indicator.
'penny' becomes 'p' (short for pence).
'sot' enclosing 'p' is 'SPOT'.
(Other definitions for spot that I've seen before include "See; place" , "Small mark or stain" , "Mark, dot" , "Notice; pimple" , "Drop of rain" .)