ITC’s shares fell sharply, closing at a three‑year low after the government announced a higher excise duty on tobacco products.
Why the stock dropped
The stock slid 3.8% to about ₹350 on Friday, following a near 10% fall the day before. The drop pushed the price to its lowest level since February 2023.
What the new tax means
From 1 February, an additional excise duty will be levied on cigarettes. Analysts expect companies may raise retail prices by 20‑30% to cover the cost. Since cigarettes account for more than 40% of ITC’s revenue and about 80% of its profit, the tax could hit earnings hard.
Analyst reactions
- Many brokerages changed their rating from “buy” to “hold” or “neutral”.
- Nuvama cut its call to “hold”, saying the tax hike is larger than expected.
- Motilal Oswal set a target price of ₹400 and warned that earnings pressure could delay other growth drivers.
- Share‑market analysts suggest the stock may stay volatile until the impact of price hikes and sales volume becomes clear, likely by next month.
What investors might consider
Conservative investors are advised to wait for the stock to close above ₹400 for a sign that the market has absorbed the news. Some suggest staying near the ₹330‑₹345 range for a better risk‑reward balance, while others see the recent slide as a possible buying chance once the situation settles.
Bottom line
The tax increase puts pressure on ITC’s most profitable segment, and short‑term outlook remains uncertain. Keep an eye on how the company handles price changes and whether sales volume holds up.
Remember, this is just an overview, not a prediction. Do your own research before making any investment decisions.