Shares of ITC, India’s largest cigarette maker, saw the biggest one-day fall in nearly six years on Thursday. The company’s shares came under pressure after the government announced increase in excise duty on cigarettes, tobacco and beedis late on Wednesday night. Shares fell as much as 10 per cent, wiping off more than ₹50,000 crore from the company’s market capitalisation.
Shares reached low level
During Thursday’s trading session, ITC shares fell 5.92 per cent to ₹379.1 on BSE. Intraday, the stock touched a low of ₹379.00, a decline of 5.96 per cent. This is the lowest level of ITC shares in the last one year. The company’s shares have suffered a major blow due to the Finance Ministry’s decision to impose 40 percent GST on tobacco, cigarettes and beedis. The new rates will be applicable from February 1, which means that the prices of tobacco related products will increase from that day. The increase in excise duty may increase the prices by at least 15 percent. Investors anticipated potential losses in the future, causing stock prices to fall sharply.
The condition of Godfrey Phillips India is even worse.
The condition of Godfrey Phillips India, the company that sells Marlboro cigarettes, was even worse. Its shares fell as much as 19 percent, the biggest fall since November 2016. The fall in stocks started after the Finance Ministry announced excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks from February 1, depending on the length of the cigarette. This tax is in addition to the existing 40 percent Goods and Services Tax (GST). Analysts are warning of a decline in volumes and downward pressure on prices as a result. “Many details are still unclear, but our calculations show that if NCCD (National Clean Energy Fund) continues, the tax increase could be more than 30 percent. Even if NCCD is included, the impact would be more than 20 percent,” Jefferies wrote in a note. Jefferies called it a negative development.