Vinod Nair, head of research, Geojit Investments, said that now with the implementation of pricing adjustments, short-term margin pressure seems more manageable for cigarette makers.

“The December quarter results show that the earlier weakness was mostly tax-driven and not due to any structural slowdown in demand,” he said. Higher retail prices do impact volumes for some time, but cigarette companies have also historically shown strong pricing power. “It has managed to preserve profitability even in a high tax regime, so the recent valuation correction may provide significant opportunities for investors, especially for companies that can maintain margins and earnings through calibrated price action.”

Why did the price of cigarettes increase?

Disclaimer: (The information provided here is being given for information only. It is important to mention here that investment in the market is subject to market risks. Always take expert advice before investing money as an investor. ABPLive.com never advises anyone to invest money here.)

8th Pay Commission: Salary will not increase, no allowance will be given… These employees will not get any benefit from the new pay commission.

On the very first day of the new year, a sharp decline was seen in Tobacco stocks in the stock market. ITC shares fell by about 8.2% to ₹370, while Godfrey Phillips’ stock fell by about 16%.

The biggest reason for this decline is the central government’s big decision on cigarette tax. According to the official notification issued by the Finance Ministry, the government has increased the excise duty on cigarettes. Now excise duty will range from ₹ 2,050 to ₹ 8,500 per thousand sticks depending on the length of the cigarette. This new rule will come into effect from February 1 and will be imposed on top of the existing 28% GST and other cesses, which will significantly increase the total tax burden.

It is estimated that companies will pass this burden on consumers, due to which the price of a cigarette may increase by ₹ 2–3.

With this, the effective GST rate on tobacco and pan masala products will be around 40%. During this period, about 4 crore shares of ITC were sold in a block deal at an average price of ₹ 400, whose total value was ₹ 1,614.5 crore. This step of the government is being considered as part of the strategy to increase revenue and control sin goods.