shares continued their decline on Friday afternoon, trading at ₹349.95, down 3.82 per cent from the previous close of ₹363.85, following an unprecedented government tax hike on cigarettes that brokerages warn will significantly impact the company’s profitability.
The stock, which had already fallen 10 per cent on Thursday in its worst single-day drop since March 2020, opened at ₹360 and touched an intraday low of ₹345.25—also its 52-week low. Trading volumes surged to 9.75 crore shares worth ₹3,409 crore, with buyers marginally outnumbering sellers at 55.97 per cent versus 44.03 per cent.
Leading brokerages downgraded their outlook after the Finance Ministry’s notification increased cigarette taxes by approximately 40-50 per cent effective February 1, 2026. Motilal Oswal downgraded ITC from ‘Buy’ to ‘Neutral’, slashing its target price to ₹400 from higher levels, citing a 6 per cent EBIT contraction forecast for FY27. The brokerage cut its EPS estimates by 12 per cent for FY27 and FY28, noting the tax increase would require price hikes of at least 25 per cent across ITC’s cigarette portfolio just to maintain current net realizations.
JM Financial highlighted that the new structure combines a 40 per cent GST rate on MRP (versus 28 per cent on net sales previously) with sharply higher basic excise duties, particularly for the 65mm+ segments that comprise 70 per cent of ITC’s volumes. The cascading tax effect and potential consumer downtrading to cheaper or illicit brands pose additional risks to volumes and margins.
Analysts noted the tax stability of recent years had helped legal cigarette makers gain ground against illicit competitors, with ITC delivering 5 per cent volume CAGR over five years. However, this sharp reversal is expected to reverse those gains, with concerns that increased price arbitrage could shift volumes back to illegal brands. The stock has now declined 28.44 per cent over the past year.