ITC hikes cigarette prices up to 15%

The excise duty hike on cigarettes by Finance Minister Arun Jaitley is certainly going to burn a hole in the pockets of cigarette smokers across the country. According to the sources, India’s largest cigarette manufacturer ITC has hiked prices by around 15 per cent.

The price hikes have been across brands with a minimum hike of around 10 per cent and a maximum of around 20 per cent, the sources added.

ITC’s portfolio of brands includes Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal. When contacted, an ITC spokesperson told Deccan Herald, “We do not comment on future pricing strategies.”

According to brokerage firm CLSA, the price hike is more than expected but could impact ITC’s volumes. “We estimate around 15 per cent weighted average hike by ITC. This is ahead of our estimates and improves margin expansion visibility,” CLSA said in a note to investor.

The double digit cigarette price hikes display the company’s pricing power but there is uncertainty on FY16 volumes at this point considering ITC has aggressively hiked prices to take up its margins in the past few years, which has impacted volumes, CLSA added in the note.

CLSA had recently downgraded the rating on ITC to SELL after seven years of positive stance Excise Duty on cigarettes was hiked by 12-22 per cent in the Budget presented on February 28.

The brokerage also cut its EPS (earnings per share) estimates by 5-10 per cent over FY16-17 for the stock.