Shares of Indian tobacco firms slumped on Thursday after the federal government imposed a brand new tax on cigarettes, making them costlier for an estimated 100 million people who smoke on this planet’s most populous nation.
ITC (ITC.NS), maker of Gold Flake and the market chief, fell 9.2%, whereas Godfrey Phillips India (GDFR.NS), opens a brand new tab, the distributor of Marlboro within the nation, tanked 14.1%.
Shares of ITC have been buying and selling at 365.50 rupees, their lowest degree since April 2023, and have been additionally on monitor for his or her worst day in practically six years. Godfrey Phillips was set for its steepest fall since November 2016.
ITC was the largest loser on the Nifty 50 index opens new tab and in addition led declines on the FMCG index (.NIFTYFMCG), opens new tab, which was buying and selling 3.2% decrease.
India’s finance ministry late on Wednesday notified an excise obligation of two,050–8,500 rupees ($22.82–$94.60) per 1,000 sticks, relying on cigarette size, efficient February 1.
Jefferies analysts known as the transfer “a transparent unfavourable,” saying it could damage gross sales volumes and revive considerations about dropping share to the illicit trade.
Well being points tied to smoking are seen as a significant drain on India’s sources, and the federal government has launched steps, together with bigger warning labels and periodic tax changes, to curb consumption.
Whereas the federal government has not specified the affect of the obligation change on retail costs, analysts say greater taxes may immediate firms to boost costs.
The obligation interprets right into a 22%-28% improve in total prices for 75-85 mm cigarettes, analysts at ICICI Securities mentioned.
“Cigarettes longer than 75 mm account for roughly 16% of ITC’s volumes and are prone to see worth will increase of 2-3 rupees per stick because of the levy,” they mentioned.
The brand new tax will apply along with the prevailing 40% Items and Companies Tax, the order confirmed.
