Discouraging the consumption of tobacco products, especially cigarettes, seems to be high on the Modi government's agenda and this does not seem like good news for blue-chip companies like ITC.
Shares of ITC were down 1 percent in morning trade today on concerns about tougher tobacco regulations.
The Economic Times reported that the government may ban the sale of loose cigarettes, increase the fine for smoking in public spaces to Rs 20,000 from Rs 200 and raise the age limit for tobacco consumption to 25 years from the current 18 years.
A ban on loose cigarettes, selling individual cigarettes from a pack, can dent ITC's volumes by 8-10 percent.
According to Reuters data, ITC has 37 buy ratings, 2 hold and one sell rating.
An expert panel, headed by Delhi government's former principal secretary Ramesh Chandra, which submitted its report to the health ministry last week, also wants the Modi government to impose a harsher penalty of Rs 50,000, up from Rs 5,000 now, on manufacturers for violating the provision on carrying pictorial warning signs on cigarette packets, the ET report said.
In it's maiden Union Budget as well, the government had raised taxes on cigarettes and tobacco products between 11 to 72 percent. Despite the hike, India is one of the cheapest countries to buy cigarettes in the world. A packet of medium-sized cigarettes here cost around nearly Rs 200. The same costs around Rs 300 or more in the US.
