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The Union Budget has hiked the excise duty on cigarettes ranging from 15 per cent on sticks with length of 65 mm and above.
Another excise duty hike of 25 per cent has also been proposed on cigarettes of length less than 65 mm. Last fiscal, the excise duty was hiked by 22 per cent by the Finance Minister, Arun Jaitley.
According to Gaurang Kakkad, Research Analyst - Institutional Equities, Religare Capital Markets Ltd, this is the fourth successive year of 18 per cent plus hike.
Kakkad pointed out that ITC, the country’s largest cigarette-maker, would take a 10 to 12 per cent price hike for the year.
This would be a clear negative for volumes. (Cigarette volumes for Q3 declined by 12-13% and EBIT growth was subdued at 8.8 per cent).
When contacted, ITC Ltd refused to comment on the matter and said that it does not reveal future strategies.
ITC stock was trading at Rs 359.50, down by 8.71 per cent, around 2.40 pm on the BSE.
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