Shares of major tobacco companies remained under pressure for a second straight session on Monday, with ITC, Godfrey Phillips India, VST Industries and Golden Tobacco are in focus after the implementation of a higher excise duty from February 1.
Godfrey Phillips India led the losses, falling as much as 6 per cent in early trade to ₹1,877.30 compared with its previous close of ₹1,995.20. By 11.51 am, the stock had recovered marginally to trade at ₹1,898.70.
ITC shares slipped nearly 2 per cent in early deals to ₹302, marking their second consecutive day of decline. At 11.49 am, the stock was trading at ₹306.70 on the NSE versus its prior close of ₹309.45. VST Industries also came under selling pressure, dropping around 3 per cent to ₹223.80 from ₹230.03.
The weakness in ITC followed its December-quarter resultswhere the company reported a 6.13 per cent year-on-year decline in standalone net profit for Q3 FY26 at ₹5,088.83 crore. Several brokerages struck a cautious tone despite pointing to resilience in its core cigarette and FMCG businesses, particularly amid recent tax hikes on cigarettes.
Bonanza remains cautious on ITC, VST Industries and Godfrey Phillips, as cigarette price hikes of 22–50 per cent—especially in the 75 mm-plus segment—are likely to weigh on volumes in India’s price-sensitive market.
Nitant Darekar, Research Analyst at Bonanza, said the February 1, 2026 taxation framework poses significant near-term challenges for tobacco stocks, with excise duties set at ₹2,050–8,500 per 1,000 sticks along with 40 per cent GST, replacing the earlier compensation cess regime.
Abhinav Tiwari, Research Analyst at Bonanza, said ITC shares have been under strain since the government announced the replacement of the GST compensation cess with excise duties on cigarettes based on stick length, along with 40 per cent GST, in line with public health goals and revenue needs after cess repayment.
According to him, the effective tax hike of more than 40 per cent could translate into cigarette price increases of over 25 per cent, potentially leading to a 15–17 per cent drop volumes in based on channel checks. This, he noted, could result in revenue declining by 13–15 per cent and EBIT by 15–17 per cent as the industry heads into FY27, keeping earnings per share under pressure.
Tiwari added that the risk of illicit cigarette sales could rise further, posing another challenge to future growth. He also highlighted that the latest Budget announcement by the Finance Minister has raised the National Calamity Contingent Duty on jarda scented tobacco and chewing tobacco from 25 per cent to 60 per cent starting May 2026, which he believes will remain an overhang for cigarette manufacturers.
These combined changes are expected to impact the operational performance for cigarette companies unless they are passed on to customers, and if that happens, volume share will be a key monitorable, Tiwari said.
In its Q3 FY26 commentary, ITC itself acknowledged that recent changes in GST and excise duty rates have led to an unprecedented rise in the tax burden on cigarettes, warning that such a steep increase could further encourage illicit trade and weigh on medium-term operational performance. The company, however, maintained that its long-term growth trajectory remains intact, supported by steady progress in its non-cigarette businesses.
Published on February 2, 2026