ITC Slumps to 3-Year Low as Tobacco Excise Hike Hits Profits
ITC Slumps to 3-Year Low as Tobacco Excise Hike Hits Profits
ITC stock slides after a government tobacco excise hike, with brokerages downgrading the stock as price hikes threaten volumes and margins.
Mumbai: ITC shares closed at a three-year low on Friday after the government announced an additional excise duty on tobacco products, effective February 1. The stock fell 3.8% to ₹350.1, extending losses after a near-10% slide the previous session. ITC's cigarette business remains the most profitable segment, contributing a substantial share to overall revenue and profits, so the tax move is expected to have a broad impact across the group.
Analysts began trimming ratings, warning that higher taxes could push cigarette prices higher and dampen demand. Some expect price increases of around 20-30% to offset the tax, raising the risk of volume weakness and margin compression. The result could push consensus estimates lower for cigarette volume and EBITDA, prompting brokerages to downgrade ITC as investors await clearer signals on price pass-through and volume trends.
Other players in the sector also faced selling pressure, underscoring a broader impact on tobacco stocks. In market portfolios, the mark-to-market value of LIC’s holding in ITC slipped significantly in two days, illustrating how quickly the policy shift can affect large investors.
Market watchers say the next weeks will reveal whether the sell-off is a temporary “falling knife” or a window for value if price-hike dynamics and demand signals stabilize. Investors are advised to watch how ITC manages pricing strategy, volume recovery, and margin protection as the industry adjusts to the new excise regime.
The sector remains cautious, with many eyeing government guidance on implementation details and how distributors respond to higher consumer costs, which will influence ITC’s ability to sustain earnings amid tighter cigarette volumes.
