ITC drops over 3% on fears over likely hike in excise duties on cigarettes

NEW DELHI: Shares of ITC ended lower by 1.72 per cent in Monday's trade amid concerns that a further hike in excise duty in the forthcoming Union Budget may weigh heavy on volume growth of the cigarette maker. At 9.35 am, the stock was ruling 3.21 per cent lower at Rs 295.05, and was the worst performing Sensex stock. The stock hit its 52-week low of Rs 289.05 last week on Wednesday.

Kotak Securities is expecting a 5-10 per cent rise in excise duties on cigarettes of different lengths.

“Given the decline in cigarette consumption over the past year, we believe incremental gains from a 15 per cent hike in cigarettes shall be modest. We expect, therefore, that this budget shall see moderate rise in excise duties on cigarettes,” the brokerage said.

“If the duty hike is in line with our expectations, we would expect the impact on ITC to be positive. A 15 per cent hike in duties shall have a negative sentimental impact; however, we believe the same is factored into the price as of now,” the research house said.

ITC peers such as Golden Tobacco, Godrej Philips (up 0.80 per cent) and VST Industries (down 1.15 per cent) and Godrej Philips (2.27 per cent) were trading mixed.