Budget will keep ITC investors on tenterhooks, Nuvama says sharp tax hike unlikely
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With India gearing up for its Union Budget on February 1, investors in ITC will be watching closely as tax policy on cigarettes takes center stage. Brokerage Nuvama Research has predicted a low likelihood of a sharp tax hike, citing recent trends and the impact of urban economic slowdown on legal cigarette volumes. The cigarette segment remains a crucial revenue driver for ITC, contributing more than four-fifths of tobacco tax revenue in India despite accounting for less than 10% of total tobacco consumption. ITC has actively countered illicit trade by introducing differentiated and premium cigarette offerings under brands such as Classic, Gold Flake, and Bristol, Nuvama noted. Nuvama Research said that a modest tax hike last year and gradual recovery in legal cigarette volumes, which grew approximately 3% year-over-year (YoY), make significant tax increases improbable for the upcoming budget. However, any potential sharp hike—exceeding 1...