GST: Cigarette makers choke, ITC worst hit
Tuesday cigarette manufacturers drowned in trade, and the ITC market leader hit the worst case, its shares more than 15 percent to Rs 276.90 on BSE, which reduced its market value to 3, 37 Rs. Lakh crore, compared to the closing value on Monday at Rs. 3.96 lakh million rupees.
The crisis comes in the back of the GST Council (goods and services), headed by Finance Minister Arun Jaitley on Monday night. The walk took effect from midnight Monday and Tuesday.
The Sensex won as much as 450 points while the Nifty dropped briefly under the 9,800-9,792.05 mark. Market losses were driven by ITC, which has the second highest level of weighing (7.65%) in the larger Nifty.
Hotels in cigarette business ITC conglomerate salt contributes nearly two thirds of total turnover of consumer goods, leading consumer goods (FMCG). More than 60 percent of ITC’s revenue comes from its cigarette business.
Stockbroker Macquarie said that the increase in the participation rate is clearly negative for the ITC. The increase in general taxes / higher retail prices would have a negative impact on volume and profits for cigarettes, he said.
Hong Kong-based investment firm CLSA said: “At the moment, it has been estimated a 10 percent increase in taxes from pre-GST levels and ITC should raise prices by 5 percent To maintain net realizations.It would be necessary to raise prices to increase profits that may also have an impact on volume. ”
JM financial in a note to investors said: “Actually, this success is passed on to consumers through price increases. We believe that it should be done 15 to 16% in the segment of Kings and 8 to 10 % The rest of the portfolio. ”
The GST Council attended Monday collecting cigarettes to eliminate the “unexpected” manufacturers who are harvested because of an anomaly that has slipped after setting the GST rate, Jaitley said.
The cigarette rate in compensation is composed of two components: a value tax of 5 percent and another switching in each category of filter and unfiltered varieties.
While the price to value remains the same, the Council increased the digital conversion related to the length of the cigarettes.
For cigarette without filter of 65 mm, the switching was increased to Rs 2076 to 1000 units. For cigarettes without filter of 65 to 70 mm, it is Rs. 3668 to 1000 units.
For the category filter, cigarette 65 mm will be charged Rs. 2076 to 1000 units, from 65 to 70 mm, Rs. 2747 to 1000 units and from 70 to 75 mm, Rs. 3668 to 1000 units.
For other filter cigarettes, the price to value was increased to 36% more than Rs. 4170 to 1000 units.
That cigarette manufacturers raised prices Currently not clear.
However, brokerage firms believe that companies must raise prices to protect margins.