India’s government is set to raise taxes on cigarettes dramatically starting February 2026.
What the new taxes mean
- Excise duty on cigarettes will go up by about 50%.
- GST on cigarettes rises from 28% to 40%.
- To keep earnings per stick the same, ITC will likely need to raise retail prices by at least 25%.
How the hike could affect ITC
ITC has enjoyed steady growth because cigarette taxes have been stable for years, helping it grow volume about 5% a year and its share price by more than 50%.
The sudden tax jump could widen the price gap between legal and illegal cigarettes, pushing some buyers toward cheaper, illicit brands. This may lead to lower legal‑brand sales and even down‑trading within ITC’s own product range.
Analyst outlook
- Valuation: the research team now uses a 14x EV/EBITDA multiple for Dec 2027, down from 17x.
- Rating: changed from “Buy” to “Neutral”.
- Target price: set at ₹400 per share.
What investors should watch
Keep an eye on any government revisions to the tax rates and on how quickly legal‑brand volumes respond. A shift toward illicit products could weigh on ITC’s earnings.
Remember, this is just an analysis, not a prediction. Do your own research before making any investment decisions.