Shares of ITC fell nearly 3 percent to a new 52-week low of 275.50 rupees on the NSE during Wednesday morning trade. The decline followed steep tax increases on cigarettes under the revised GST framework effective February 1 2026. Motilal Oswal Financial Services maintained a cautious stance on the stock. The brokerage noted that cigarette taxes for ITC rose 60 to 65 percent, requiring an estimated 35 percent increase in maximum retail prices based on historical sales mix. This marks the largest such adjustment in recent years after a period of relative stability from 2018 to 2025. The one-month interval between announcement and implementation also differed from past patterns. ITC has responded with gradual price adjustments rather than immediate full pass-through to limit shifts toward illegal products and preserve legal market share. Motilal Oswal described the current period as having two phases. The first involves gradual price rises toward tax-neutral levels. The second phase will begin once prices fully reflect the tax change and competition between legal and illicit segments stabilizes. The firm forecasts a 15 percent revenue drop and 19 percent decline in EBIT for the cigarette business in fiscal 2027 along with a 10 percent volume reduction. It expects volumes to stay flat in fiscal 2028 and models a negative EBIT compound annual growth rate of about 8 percent through fiscal 2028. The brokerage assigned a neutral rating with a 300-rupee target price. ITC shares have declined more than 5 percent over one week, 12 percent over one month and 24 percent year to date. Non-cigarette operations continue to show improvement with FMCG viewed as a longer-term growth area.
