Media reports said Union health minister Harsh Vardhan had sought a tax increase on cigarettes of all lengths by R2-3.5 per stick. We believe the measure, if implemented, will be a significant negative for ITC in the near term. Excise duty increase has been an average 15% since FY10, which the company has passed on to consumers.
ITC has been consistent in its approach in dealing with excise duty increase over the past five years. The company has consistently passed on the increase to consumers, which has meant that the cigarette business ebit has continued to remain robust and deliver mid-teens growth over the period.