ITC Plunges Most in Over Two Years on Higher Cigarette Tax Shock
(Bloomberg) -- ITC Ltd. plummeted the most since July 2017 after India’s Finance Minister Nirmala Sitharaman proposed higher levies on cigarettes and other tobacco products.
Shares of India’s largest cigarette maker fell 6.9% to 219 rupees a piece during Mumbai trading on Saturday. Rival Godfrey Phillips India Ltd., maker of Red & White and Four Square cigarette brands, also slipped 6.5% after the announcement outstripping the 2.4% decline in the benchmark S&P BSE Sensex.
The government, however, hasn’t tweaked the duty rates of ‘bidis’ -- a local hand-rolled version of leaf-wrapped tobacco that is a big employment provider among low wage earners.
“The government is taxing the sin goods in the hands of those who can afford to pay the higher price,” Anil Talreja, partner at Deloitte India said over phone. “In my view, this would have a significant impact.”
Although ITC has been on an aggressive diversification drive and entering fast moving consumer goods ranging from instant noodles to incense sticks, cigarettes still contribute the largest chunk to its revenues. In the year ended March 2019, the segment accounted for as much as 46.4% of ITC’s annual revenues down from 66% in 2010, according to the data compiled by Bloomberg.
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