Cigarette stocks shine! ITC, Godfrey Phillips rise up to 12% on price hike prospects & more related News Here

Cigarette stocks rose on Dalal Street on Wednesday after reports that manufacturers have raised prices to counter higher tax outgo. Shares of ITC Ltd, Godfrey Phillips India Ltd and VST Industries Ltd climbed up to 15% after media reports that the companies have implemented price hikes to pass on the impact of the recent excise duty hike to consumers. As of 1:15 pm, Godfrey Phillips India Ltd. was trading at 2,386, up 318 points or 15.4%. Meanwhile, ITC rose 2% to 331, while VST Industries Ltd rose 2% to 244. The move by cigarette makers is being seen as a move to protect margins, with the expected decline in EBIT now estimated to be around 2%, much lower than the earlier estimate of 8-15%. These changes follow the government’s February 1 notification, which abolished the GST Compensation Cess and introduced a new tobacco taxation structure.ITC Ltd is likely to increase cigarette prices by 20-40% across all brands. New shipments reflecting the revised pricing are expected to reach the market soon, while retailers are also said to be selling existing inventory at higher rates. The market reaction was swift. ITC Ltd rose 2% to Rs 331 during the session, extending its gains for the third consecutive day and taking its cumulative rise in three sessions to nearly 5.5%. Godfrey Phillips India Ltd jumped 12% to Rs 2,315 per share on the BSE, marking a gain of over 15% in two days. VST Industries Ltd also traded higher, rising 3.3% in morning deals.The new taxation structure has reset the excise duty on cigarettes to between Rs 2,050 and Rs 8,500 per 1,000 sticks with 40% GST. The revised regime has materially increased the overall tax burden, raising concerns about demand trends, margins and the potential for greater illicit trade.The budget also introduced a technical change in the National Disaster Contingency Charge (NCCD). The statutory NCCD rate on tobacco products has been increased from 25% to 60% with effect from May 1, 2026. Also, through a notification it was clarified that the effective duty rate will continue at 25%, meaning there will be no immediate increase in tax outgo for cigarette companies. In fact, while the fee remains unchanged now, the government has enabled future increases without the need for any further amendments to the law.The country’s largest cigarette maker ITC reported revenue growth of 6.2% year-on-year in the December quarter. The performance was supported by double-digit expansion in its FMCG-other business and steady momentum in cigarettes. Cigarette revenues increased 8% due to a 7% increase in volume.However, margins in the cigarette segment declined 163 basis points year-on-year to 59.9%, a multi-quarter low, due to consumption of high-cost leaf inventory. Management indicated that leaf procurement prices have moderated in the current crop cycle, which could support margins in the coming quarters.