Shares of ITC Ltd (NSE: ITC) traded marginally higher on Monday, gaining 0.44% to ₹351.60, compared with Friday’s close of ₹350.05. The mild recovery comes after the stock witnessed a sharp 14% fall over the previous two trading sessions, triggered by concerns over higher excise duty on cigarettes. ITC shares plunged 5 percent to hit a fresh 52-week low of Rs 345.25 apiece on January 2, before paring some losses.The stock has fallen more than 13 percent in the past five days, and over 15 percent in the past six months.The sharp selloff wiped off Rs 72,000 crore from the company’s market capitalisation in just two days. It now stands at around Rs 4,38,639 crore. The stock currently has a P/E ratio of 22.59.
Global brokerage Nomura has downgraded ITC Limited to 'Reduce' from 'Buy' as it factored in the impact of the cigarette excise hike on volumes and profit margin. The brokerage also cut ITC share price target to ₹340 from ₹540. The current target price implies a downside of 6.6 per cent from Friday’s close level. The brokerage was expecting tax neutrality for cigarettes. In this backdrop, ITC will probably hike the prices by 35 per cent to maintain margins, Nomura said. "This could lead to some margin pressure initially, which has never happened in the past except in the financial year 2026 (FY26) due to high raw material prices and competitive intensity."The price hike will affect the volumes and lead to a 15 per cent Y-o-Y sales decline in the financial year 2027 (FY27), the brokerage said.Moreover, high taxes usually support growth in illegal cigarette sales, which will further pressure ITC's sales, according to Nomura. The Ministry has also notified the Health and National Security Cess Act, levying cess on the manufacturing capacity of pan masala-related businesses from February 1. The total tax incidence on pan masala, after taking into account 40% GST, will be retained at the current level of 88%.The revised tax structure replaces the existing regime of 28% GST, along with a compensation cess on tobacco and related products.