India’s biggest institutional investor, Life Insurance Corporation (LIC), saw its ITC holding drop by about ₹10,445 crore in just two days.
Why the loss happened
On Wednesday the Finance Ministry announced higher excise duties on cigarettes, ranging from ₹2,050 to ₹8,500 per 1,000 sticks, based on length. The new rates start on February 1.
Impact on ITC shares
- ITC’s stock fell 14% after the tax news.
- The price touched a three‑year low of ₹345.35 before closing at ₹350.10.
- LIC owns 15.86% of ITC (about 199 crore shares) as of the September quarter.
What analysts are saying
Top brokerages cut their ratings on ITC. Motilal Oswal said the tax hike could increase cigarette taxes by about 50%, forcing ITC to raise prices by at least 25% just to keep earnings per stick. The firm lowered its target to ₹400 and changed its call to “Neutral”.
Jefferies warned that ITC may need a 40% price increase to pass the full tax burden to consumers. If it does, the effective tax on a stick could rise from 55% to 65% of the retail price. The broker moved its rating from “Buy” to “Hold” and said near‑term upside looks limited.
Broader picture
ITC’s stock has already fallen about 28% over the past year, and 2025 was a flat year for the tobacco‑to‑agri conglomerate. The new tax adds another layer of pressure for investors.
Key takeaways for investors
- LIC’s loss highlights how quickly policy changes can affect large portfolios.
- Higher cigarette taxes may force ITC to raise prices, which could hurt demand.
- Analyst downgrades suggest caution for anyone holding or considering ITC shares.
Remember, this is just an overview, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.