ITC drops 15% in two days as cigarette tax shifts to fixed excise, Nuvama cuts to 'Hold'
A move to fixed excise duty (BED up from Rs 5 to Rs 4,000 per 1,000 sticks) lifted ITC's tax incidence 30%+, effective February 1. Nuvama downgraded to 'Hold' and cut its target to Rs 415 from Rs 534, trimming the tobacco multiple to 17x from 23x. Expect ~20% price hikes (Rs 2-5 per stick), but FMCG, paperboards and a 4% dividend yield offer offsets.
ITC lost ~15% over two days after cigarette taxation shifted to fixed excise duty, raising tax incidence 30%+. Nuvama downgraded to 'Hold', cut target to Rs 415, but cited FMCG, paperboards and dividend strength as offsets.