ITC drops 15% in two days on steep cigarette excise hike; Nuvama cuts to 'Hold'
ITC shares slid ~15% over two sessions after a sharp cigarette excise duty hike effective February 1. Nuvama downgraded to 'Hold' and cut its target to Rs 415 from Rs 534, flagging a likely 20% price hike, volume compression and illicit-market migration, while citing FMCG resilience, a 4% dividend yield and 85% payout as support.
What happened
ITC shares fell ~15% over two days after a sharp cigarette excise duty hike effective February 1. Nuvama downgraded to 'Hold', cut target to Rs 415, expecting a
Key facts
- 15% drop in 2 days
- target price Rs 415 from Rs 534
- BED Rs 5 to Rs 4,000 per 1,000 sticks
- 30%+ tax incidence rise
- 20% price hike
- 4% dividend yield
- 85% payout ratio
- 23% illicit market share
- 17x from 23x multiple
Why this matters
With tobacco facing regulatory and volume pressure, the case strengthens for accelerating diversification into resilient FMCG segments to reduce reliance on cigarette cash flows.
What to watch
- Actual gazette notification detailing excise slab changes
- ITC official price-hike announcements and quantum
- Q4 FY cigarette volume data and management guidance
- Illicit-trade share commentary from industry bodies (TII)
- Additional broker rating actions and consensus target trajectory
- Dividend declaration reaffirming payout
- ITC to announce staggered cigarette price hikes across brands (Feb-Mar)
- More brokerages likely to revise targets/ratings post-management commentary
- Emphasis on non-cigarette FMCG, hotels demerger and dividend as value support
- Peers (Godfrey Phillips, VST) reprice; distributors adjust stocking ahead of Feb 1
- Yield-seeking and index funds provide downside support near Rs 400-415