Shares of FMCG major ITC Limited declined nearly 2 percent in Thursday’s trading session, a day after cigarette stocks witnessed sharp gains amid reports of significant price hikes by manufacturers to offset higher tax outgo.The stock was trading around Rs 330 today, compared to Rs 332.70 in the previous session, when it had gained over 2 percent. The recent volatility follows reports that cigarette makers have implemented steep price increases following the latest excise duty revisions.Global brokerage UBS has maintained a ‘Buy’ rating on ITC but trimmed its target price to Rs 395 from Rs 420. The revised target still implies an upside potential of over 29 percent from the previous closing level.
According to media reports, manufacturers have raised prices sharply to counter the impact of higher excise duties, resulting in an increase in EBIT per stick. Nearly 50 percent of ITC’s cigarette portfolio is expected to see larger-than-anticipated price hikes. Premium brands under ITC’s portfolio have seen notable increases. Prices for Gold Flake and Classic (Premium) have reportedly risen by 41 percent, while Classic Connect (Slims) is up 20 percent and Gold Flake Superstar (Value) by nearly 19 percent. The strategy appears focused on passing on higher costs to consumers, particularly in premium categories, while limiting increases in more price-sensitive segments such as 69 mm and 64 mm variants.This calibrated pricing move is expected to cushion profitability despite a potential marginal impact on volumes.
Cigarette stocks have remained volatile this year after Parliament passed the Central Excise (Amendment) Bill, 2025, paving the way for a sharp increase in duties on cigarettes and other tobacco products. The revised excise duty—ranging between Rs 2,050 and Rs 8,500 per 1,000 sticks depending on length—came into effect on February 1. This is in addition to the existing 40 percent GST.For ITC, the key monitorable going forward will be volume resilience amid higher prices and how effectively the company balances margin protection with market share. Investors appear cautiously optimistic, but near-term stock movement may remain sensitive to demand trends and further regulatory developments.