Tough times ahead for ITC's tobacco division: Taher Badshah, Motilal Oswal AMC

In a chat with ET Now, Taher Badshah, Senior Vice President & Co-Head Equities at Motilal Oswal Asset Management Co Ltd, shares his thoughts on the recent spike in excise duty on cigarettes. Excerpts:

ET Now: Excise duty on cigarettes has gone up - that is perceived as bad news for the tobacco sector. Yet, ITC is not cracking. Infact, ITC has gone up post-budget. What do you think?

Taher Badshah: ITC did correct quite significantly prior to that and clearly, expectations were much worse. Meanwhile, we saw a bit of the beta of the market come off, so it was natural for ITC to hang around there and probably get a little more traction post slightly better than expected scenario on cigarettes and tobacco.

However, it is going to be a challenge if one were to read the new government’s approach towards this sector. It is something which probably will be quite head winded, not just for this year but perhaps even in the coming years. If this trend were to continue, then it is not going to be a very easy walk for ITC on the core side of the business.