In one fell swoop ‘pauper’ Investors! ITC’s market cap dropped by ₹50,000 crore; Budget decision spoiled the game

ITC Shares Downfall: On Thursday, the shares of ITC, the largest cigarette manufacturing company in India, suffered the biggest decline in a single day in the last six years. The company’s shares are under pressure because the government late on Wednesday night announced increase in excise duty on cigarettes, tobacco and beedis. Due to this, the shares fell by 10 percent and due to this the market capitalization of the company reduced by more than Rs 50,000 crore.

During Thursday’s session, ITC shares fell 5.92 percent to Rs 379.1 on BSE. At the same time, in intra-day it fell by 5.96 percent to Rs 379.00. This is the record low for ITC shares in the last one year.

What is the government’s decision?

The Finance Ministry has decided to impose GST on tobacco, cigarettes and beedis at the rate of 40 percent. This has dealt a big blow to the company’s shares. The new rates will be effective from February 1. That means the prices of tobacco related products will increase from this day. Due to increase in excise duty, prices may increase by at least 15 percent. Due to this, investors sensed the losses to come, due to which there was movement in the shares.

The condition of Godfrey Phillips India is even worse.

The condition of Godfrey Phillips India, the company selling Marlboro cigarettes, was even worse. Its shares have fallen by 19 percent. This is the biggest fall since November 2016. This trend of decline in shares started since the Finance Ministry has said to impose excise duty of Rs 2,050 to Rs 8,500 on per 1,000 cigarette sticks depending on the length of the cigarette from February 1. This tax has been imposed on top of the existing 40 percent Goods and Services Tax (GST). In such a situation, analysts are warning of reduction in volumes and pressure on prices.

Also read: Strong demand, record tax! GST collection increased by 6.1% in December; India’s big victory amid recession

Estimated tax increase of more than 30%

Jefferies wrote in a note that many things are still not clear, but our calculations show that if NCCD continues, the tax increase could be more than 30 percent. Even if NCCD is included in it, the impact will be more than 20 percent. Jefferies has declared it negative.