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Last Updated : Feb 09, 2017 03:18 PM IST | Source: Moneycontrol.com

ITC hikes cigarette prices; Now, pay Rs 139 for a Classic pack

ITC is in the process of hiking prices of some of its cigarette brands. Distributors and dealers claim that the new packs with higher prices will hit the market in a few days. In the premium category (Classic) the price hike is 13 percent.

 
 
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Malini Bhupta
Moneycontrol Bureau


ITC is in the process of hiking prices of some of its cigarette brands. Distributors and dealers claim that the new packs with higher prices will hit the market in a few days. In the premium category (Classic) the price hike is 13 percent.

For instance, a pack of Classic, which cost Rs 123/125 for a pack of 10 before the Budget, will now be priced at Rs 139/Rs 140. India Kings, which was priced at Rs 135 will now be priced at Rs 150, which is an increase of 11 percent. Price of Goldflake Kings will also increase from the current Rs 123/Rs 125 to Rs 139/Rs140.

ITC sells numerous cigarette brands, some of which are Silk Cut, Navy Cut, Insignia, Lucky Strike, Capstan and Scissors. Prices of the other brands have gone up by Rs 4-5 per pack.


The price hike comes after excise duty on cigarettes was hiked by 6 percent in the Union Budget, which was lower than the 10 percent estimated by the Street. This is the sixth consecutive year when prices have been hiked, but the magnitude has been lower than the past. Analysts are expecting the company to clock single-digit volume growth in FY18.

According to Jefferies, punitive excise duty regime on cigarettes has forced ITC to take a sharp price increase and hurt volumes in the past; FY18 looks like a benign year for cigarette volumes (we are building in 6 percent volume growth for FY18 currently).

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Says Ambit Capital, this (6 percent excise hike) is significantly positive for the stock as it indicates the balance that the government is trying to maintain between curbing consumption and earning tax revenue from cigarettes. The stock was trading at a 20 percent discount to Hindustan Unilever and the broader FMCG universe, as a result of the overhang of punitive excise duty hikes. The stock has rallied post-Budget as the hikes were milder than expected.

However, GST continues to be an overhang for the stock. If the GST rate on cigarettes is not tax-neutral the stock could again come under pressure. Analysts believe that even if the GST rate is 40 percent the negative impact on the stock would be limited, as the stock continues to be trading at a discount to other FMCG stocks.



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First Published on Feb 9, 2017 12:19 pm
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