After reports of cigarette price hikes during the day, shares of companies like ITC, Godfrey Phillips and VST Industries rallied on the stock market. While ITC and VST Industries were up over 2% at Rs 332 and Rs 245 apiece, respectively, the stock of Godfrey Phillips surged 20% to hit the upper circuit at Rs 2,481. Towards the end of the trading session, the stock declined slightly to close at Rs 2,479.
It was the third consecutive day of gains for ITC during the trade. The intense buying in the stocks followed media reports claiming that cigarette makers have implemented price hikes. The move is understood to be in response to bear the impact of higher excise duties. Raised cigarette prices may lead to better EBIT per stick.
According to reports, leading cigarette maker Godfrey Phillips raised the price of Marlboro Compact to Rs 11.5 per cigarette from Rs 9.50 earlier.
Godfrey Phillips also manufactures and distributes brands like Red & White, Four Square, Cavanders and Stellar.
On the other hand, prices for ITC’s Gold Flake and Classic (Premium) have been raised by 41%, Classic Connect (Slims) by 20% and Gold Flake Superstar (Value) by nearly 19%, according to some media reports.
ITC is the biggest cigarette player in India, occupying more than half of the market. However, smokers may continue to pay the old prices until the new stock reaches the market.
After last year’s indirect tax reforms under the Goods and Services Tax (GST) regime, tobacco products attract a base tax of 40%, along with additional excise duty starting from February 1.
Cigarettes fall in the “sin tax” category, under the 40% tax slab. Earlier, the “sin tax” category faced 28% GST apart from excise duty.
After the implementation of the increased taxes, it was expected that tobacco companies would raise prices. While smokers will have to pay higher prices, the hike will help companies offset the impact of taxes on their financials.
