ITC cigarette sales fall, shares drop

ITC Ltd, an Indian public conglomerate company that delivers four out of every five cigarettes sold in India, faced a new blow after quarterly tobacco product sales suddenly decreased, forcing its shares to be lower even as net income raised by a fifth.

ITC Ltd id the India’s fifth biggest company by market capitalization. British American Tobacco is the owner of 30.8 % of its shares. ITC makes up about half its earnings from cigarettes. Government regulations on tobacco consumption set sales at defiance.

ITC Logo

India Tobacco Company Limited logo

Cigarette sales volumes dropped nearly 2.5-3 per cent compared with the previous quarter, in accordance with three analysts informed by the company on its fiscal first-quarter data. They had expected poor volumes

G. Chokkalingam, executive director and chief investment officer at Centrum Wealth Management that sold some of its ITC shares not long ago, said that the key step for ITC would be to further improve its efforts in order to lessen its dependence on the cigarette business.

Uttar Pradesh, the most populous state of the country, in early July raised the value-added tax on cigarettes to 50 % from 17.5 %. The northern state is conducive to 5 % of the company’s sales by value.

Chokkalingam said that then Uttar Pradesh a lot of states will intend to increase the taxes on tobacco products because of its health risks.

ITC said that net income jumped to 16.02 billion rupees in the quarter ended June 30 from 13.33 billion rupees compared with previous year, after the company increased cigarette prices in April.

In accordance with Thomson Reuters I/B/E/S, tobacco analysts had expected a 23 % increase in income.

The company does not inform about the details on sales volumes in its profit statements.

Shares in ITC, which also deals with food sale and is the owner of hotels and is a staple of fund portfolios for its protecting nature, dropped as much as 2.5 % after the results and ended 1.77 % lower, lagging the broader market.

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