LIC’s holding in ITC stood at 15.86% (199 crore equity shares) at the end of the September quarter.
The Finance Ministry late on Wednesday notified a revised duty structure ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on cigarette length, effective February 1. This move sent shockwaves across the cigarette industry, sparking a sell-off in tobacco stocks.
The ITC shares crashed to a three-year low of Rs 345.35 on Friday before closing the session at Rs 350.10, down by Rs 13.75or 3.8% over the Thursday closing price.
Read more: ITC, Godfrey Phillips shares slide up to 5% amid sharp excise duty hike on cigarettes
Following the move, the stock has seen downgrades from several top brokerages.
Motilal Oswal Financial Services called the magnitude of the tax increase staggering. The cigarette taxes will jump approximately 50%, forcing ITC to implement price hikes of at least 25% at the portfolio level just to maintain current net realisation per stick, it said in a note. The brokerage downgraded ITC from ‘Buy’ to ‘Neutral’ with a revised target price of Rs 400.”To offset the tax burden, ITC will need to implement substantial price increases. Assuming no mix change, ITC requires a 40% price hike just to pass on the impact,” Jefferies warned in its downgrade from Buy to Hold. The firm noted that if ITC passes on the full impact through price hikes, the effective tax hike comes to approximately 70%, pushing tobacco taxes per stick from 55% to 65% of MRP.
Read more: ITC shares plunge to 3-year low after tax bombshell: Is this a falling knife or hidden value?
Jefferies remained cautious, stating that “near-to-medium term upside now looks capped” and warning the stock could face more pressure in the near term.
While ITC’s worries do not stem from the recent government action, as 2025 was a completely washout year for the tobacco-to-agri conglomerate. The stock price has declined 28% over a 1-year period.
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