ITC Shares Hit 52-Week Low Amid Tax Hikes, Analysts Predict Further Declines
ITC shares fall 3% to fresh 52-week low; Motilal Oswal sees more pain ahead
Image: The Economic Times
ITC shares fell nearly 3% to a new 52-week low of ₹275.50 due to steep tax hikes on cigarettes. Motilal Oswal Financial Services forecasts a challenging phase for the company, predicting a 15% revenue decline and a 19% dip in EBIT in FY27 as the cigarette market adjusts to new regulations.
- 01ITC's shares dropped to ₹275.50, marking a 52-week low amid significant tax increases on cigarettes.
- 02Motilal Oswal projects a 15% revenue decline and 19% EBIT dip in ITC's cigarette business for FY27.
- 03The brokerage notes that the cigarette industry is undergoing a major regulatory shift with a 60-65% increase in taxes.
- 04ITC is implementing a phased price increase strategy to mitigate the impact of high taxes and retain market share.
- 05Despite challenges in the cigarette segment, ITC's non-cigarette business is showing structural improvements.
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Shares of ITC, a major player in the fast-moving consumer goods (FMCG) sector, fell nearly 3% to a new 52-week low of ₹275.50 on the National Stock Exchange on Wednesday. This decline follows significant tax hikes on cigarettes, with Motilal Oswal Financial Services expressing concerns about the stock's future. The brokerage highlighted a 60-65% increase in cigarette taxes due to the implementation of GST 2.0, necessitating a 35% increase in maximum retail prices (MRPs) to maintain profitability. ITC's strategy involves gradual price hikes to avoid a shift to illicit markets. Analysts predict a challenging transition period, with expectations of a 15% revenue decline and a 19% dip in earnings before interest and taxes (EBIT) for FY27. Despite the struggles in the cigarette segment, ITC's non-cigarette business is reportedly improving, with FMCG performance seen as a potential growth driver. However, the overall outlook remains uncertain as the company navigates the impact of tax hikes and competition from illegal cigarettes.
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The significant tax increases on cigarettes are expected to lead to higher retail prices, potentially affecting consumer purchasing behavior and ITC's market share.
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