ITC’s share price tumbled 14% over two trading days, sliding to a three‑year low after the government announced a hefty increase in tobacco excise duty.
Share price plunge and wealth loss
The stock fell 10% in a single day on Thursday, then another 5% the next day, closing at ₹345.25 on the NSE. The drop wiped out about ₹72,300 crore of market value for shareholders.
LIC’s huge hit
Life Insurance Corporation of India (LIC), which owns roughly 15.86% of ITC, saw the value of its stake fall by more than ₹11,460 crore in just two days.
New excise duty explained
From Feb 1, the finance ministry will levy an excise duty of ₹2,050‑₹8,500 per 1,000 sticks, depending on cigarette length. This sits on top of the 40% GST already in place.
- Analysts estimate cigarette prices may need to rise up to 40% to pass the full tax cost to consumers.
- Historically, a price jump of this size cuts volumes by 3‑9%.
- Higher prices could push some smokers toward cheaper, illicit products.
Broker downgrades
At least 11 broker houses, including Goldman Sachs, JPMorgan and Morgan Stanley, cut their ratings on ITC.
- Nuvama Institutional Equities lowered its FY27/28 EBITDA outlook by 7% and changed its rating to “Hold” with a target of ₹415.
- Motilal Oswal trimmed the valuation of the cigarette business to 14× EV/EBITDA (from 17×) and moved its rating to “Neutral”, setting a target of ₹400.
What investors should note
The tax hike adds pressure on ITC’s core tobacco earnings, while the company’s non‑tobacco businesses (FMCG, paper) may not be enough to offset the short‑term hit.
Investors may want to watch how quickly the company can pass the tax burden to consumers and whether any policy relief is negotiated later.
Disclaimer
Remember, this is just an overview, not a prediction. Do your own research or talk to a qualified advisor before making any investment decisions.