Shares of cigarette manufacturers ITC, Godfrey Phillips India, and VST Industries surged up to 15% on Wednesday, February 18, extending their winning run to the second day in a row. According to The Times of India, the rally in cigarette stocks comes amid several reports that these companies have taken steep price hikes to offset the impact of the excise duty increase. Godfrey Phillips India shares climbed more than 12% to touch an intraday high of ₹2,315, while ITC advanced 2% to ₹331 and VST Industries gained around 3% to reach ₹244. The sharp rise reflected strong buying interest amid expectations that higher pricing could support margins despite regulatory pressures on the tobacco industry.
The surge in cigarette stock prices is attributed to reports of steep price hikes implemented by these companies to counter the impact of excise duty increases. As reported by The Times of India, the cess and excise levies replaced the existing 28% plus compensation cess on such 'sin goods' which was there since GST was rolled out on July 1, 2017. According to Moneycontrol, nearly 50% of ITC's portfolio may see a larger-than-expected price hike, with ITC's Gold Flake and Classic (Premium) prices increased by 41%, Classic Connect (Slims) by 20%, and Gold Flake Superstar (Value) by nearly 19%. Both players are expected to launch new products with strong price hikes in the 74mm category. The price hikes are aimed at offsetting the recent excise duty increase, with the expected EBIT decline now seen at around 2%, compared with earlier estimates of 8–15%.
The Times of India reports that ITC is likely to increase cigarette prices by 20-40% across brands, with fresh shipments reflecting the revised pricing expected to reach the market soon. According to The Times of India, retailers are also selling existing inventory at higher rates. As per CNBC TV18, Godfrey Phillips India has raised the price of Marlboro Compact from ₹9.5 per stick to ₹11.5 per stick. As per CNBC TV18, brokerage firm UBS maintains a ''''Buy'''' rating on ITC Limited and notes that distributor checks indicate a range of imminent price hikes is being rolled out across categories. The 84mm cigarette segment is expected to see the steepest hike, with prices likely to rise to ₹24 per stick from ₹17 earlier — a sharp 41% increase. In the smaller 64mm segment, prices are expected to increase to ₹7 per stick from ₹5.90 earlier, while the pricing for the 69mm Gold Flake variant is expected to be around ₹12 per stick.
Under the new framework, excise duties on cigarettes were restructured to a range of ₹2,050 to ₹8,500 per 1,000 sticks, alongside a 40% GST. This has materially raised the overall tax burden on cigarettes, triggering concerns over demand, margins and the risk of increased illicit trade. Adding to the unease is a technical change in the National Calamity Contingent Duty (NCCD) announced in the Budget. The government raised the statutory NCCD rate on tobacco products from 25% to 60%, with effect from May 1, 2026. However, the Budget also clarified that the effective duty rate will continue at 25% through a notification, meaning there is no immediate increase in tax outgo for cigarette companies. From February 1, a new MRP-based valuation mechanism was introduced for tobacco products whereby GST would be determined based on retail sale price declared on the package.
The 15% surge represents a significant movement in the cigarette manufacturing sector, with Godfrey Phillips India leading the gains. According to The Times of India, Godfrey Phillips shares were trading at ₹2,386, up 15.4%, as of 1:15 pm, marking a more than 15% gain over two days. As of the latest trading session, Godfrey Phillips shares traded 11% higher at ₹2,303, while ITC was up 1.4% at ₹331 and VST Industries traded 1.88% higher at ₹243.95. The Parliament approved the Central Excise (Amendment) Bill, 2025 in December, clearing the way for sharp increases in duties on cigarettes and tobacco products, with excise duty ranging from ₹2,050–8,500 per 1,000 sticks depending on cigarette length, effective from February 1. UBS has maintained a buy rating on ITC and trimmed its target price to ₹395 from ₹420 earlier, implying a 21% upside from Tuesday's closing price of ₹325.45 per share.
