ITC, Godfrey Phillips, other cigarette stocks jump up to 13% amid reports of price hike – News Air Insight

Shares of cigarette makers, including ITC, Godfrey Phillips and VST Industries, surged up to 13% on Friday after reports indicated companies had raised prices following the recent tax hike, passing on higher costs to consumers. The rally was also supported by value buying at lower levels after a sharp correction triggered by the cigarette taxation overhaul announced on December 31, which came into effect from February.

Godfrey Phillips shares rose as much as 13% to their day’s high of Rs 2,240 per share on the BSE. ITC, one of India’s largest FMCG majors, rose 6% to Rs 328 per share. VST Industries rose 6% to its day’s high of Rs 243 on the BSE.

A report by CNBC TV-18 stated that higher-priced cigarette packets have been introduced in the market. Price hikes of between 15% to 30% have been taken across the board. For Godfrey Phillips, the 97mm pack is now priced at Rs 300 from Rs 240 earlier, a hike of 25%, according to the report.

Under the new framework, excise duties on cigarettes were restructured to a range of Rs 2,050 to Rs 8,500 per 1,000 sticks, alongside a 40% GST. This has materially raised the overall tax burden on cigarettes, triggering concerns over demand, margins and the risk of increased illicit trade.

Adding to the unease is a technical change in the National Calamity Contingent Duty (NCCD) announced in the Budget.

The government raised the statutory NCCD rate on tobacco products from 25% to 60%, with effect from May 1, 2026. However, the Budget also clarified that the effective duty rate will continue at 25% through a notification, meaning there is no immediate increase in tax outgo for cigarette companies. In simple terms, this is not a tax hike today, but a future enabling provision. The government has created room to raise the duty later without changing the law again.

In the December quarter, ITC reported 6.2% year-on-year revenue growth, driven by double-digit growth in FMCG-Others and steady momentum in cigarettes. Cigarette revenues grew 8%, supported by 7% volume growth.Margins in the cigarette segment, however, slipped to a multi-quarter low of 59.9%, contracting 163 basis points YoY due to the consumption of high-cost leaf inventory. Management has indicated that leaf procurement prices have moderated in the current crop cycle, which could support margins in the coming quarters.

Axis Securities has said ITC’s long-term growth trajectory remains intact, even though cigarette volumes could face pressure in the medium term due to higher taxes. It also highlighted continued progress in non-cigarette businesses such as FMCG, hotels and agri-business.

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