Cigarette stocks light up! ITC, Godfrey Phillips surge up to 12% on prospects of price hike – The Times of India

Cigarette stocks lit up Dalal Avenue on Wednesday after reviews that producers had raised costs to counter greater tax outgo. Shares of ITC Ltd, Godfrey Phillips India Ltd and VST Industries Ltd climbed by as a lot as 15%, following media reviews that corporations have applied price hikes to go on the impression of the current excise obligation enhance to shoppers. As of 1:15 pm, Godfrey Phillips India Ltd was buying and selling at 2,386, up 318 factors or 15.4%. On the similar time, ITC gained 2% to 331 whereas VST Industries Ltd strengthened to 244, including 2%. The transfer by cigarette makers is seen as a step to defend margins, with the anticipated decline in EBIT now projected at round 2%, sharply decrease than earlier estimates of 8–15%. The adjustments comply with the federal government’s notification on February 1 ending the GST compensation cess and introducing a brand new tobacco taxation framework.ITC Ltd is probably going to enhance cigarette costs by 20–40% throughout manufacturers. Contemporary shipments reflecting the revised pricing are anticipated to attain the market quickly, whereas retailers are additionally stated to be promoting present stock at greater charges. Market response was swift. ITC Ltd climbed 2% to Rs 331 throughout the session, extending its beneficial properties to a 3rd straight day and taking its cumulative rise over three classes to about 5.5%. Godfrey Phillips India Ltd jumped 12% to Rs 2,315 per share on the BSE, marking a greater than 15% achieve over two days. VST Industries Ltd additionally traded greater, advancing 3.3% in morning offers.The new taxation construction has reset excise duties on cigarettes to between Rs 2,050 and Rs 8,500 per 1,000 sticks, alongside a 40% GST. The revised regime has materially elevated the general tax burden, main to considerations round demand tendencies, margins and the likelihood of better illicit commerce.The Funds additionally launched a technical change to the Nationwide Calamity Contingent Responsibility (NCCD). The statutory NCCD fee on tobacco merchandise has been raised from 25% to 60%, efficient Could 1, 2026. On the similar time, it was clarified that the efficient obligation fee will proceed at 25% by a notification, that means there isn’t any speedy enhance in tax outgo for cigarette corporations. In impact, whereas the obligation stays unchanged for now, the federal government has enabled a future enhance with out requiring one other modification to the legislation.Within the December quarter, ITC, the nation’s largest cigarette producer, reported income development of 6.2% year-on-year. The efficiency was supported by double-digit growth in its FMCG-Others enterprise and regular momentum in cigarettes. Cigarette revenues rose 8%, pushed by 7% development in volumes.Nevertheless, margins within the cigarette section fell to 59.9%, a multi-quarter low, contracting by 163 foundation factors year-on-year due to the consumption of excessive-value leaf stock. Administration indicated that leaf procurement costs have moderated within the present crop cycle, which may assist assist margins within the coming quarters.