ITC Limited recorded a significant block trade on the National Stock Exchange (NSE), marking a substantial institutional transaction in the tobacco and consumer goods major's shares.

Block Trade Details

The transaction involved a considerable volume of shares and was executed at a specific price point on the NSE platform.

Transaction Significance

Block trades are typically executed by institutional investors, including mutual funds, insurance companies, foreign institutional investors, or other large market participants. These transactions are usually conducted to minimize the market impact that such large volumes might have if traded through regular market mechanisms.

The execution price of ₹339.00 per share represents the agreed-upon rate between the buyer and seller for this substantial equity transaction. The total consideration of ₹76.65 crores reflects the significant scale of institutional activity in ITC shares.

Market Context

Such block transactions are common in large-cap stocks like ITC, where institutional investors frequently adjust their portfolio positions. The NSE platform facilitates these large-volume trades through its block deal mechanism, ensuring efficient price discovery and settlement for substantial equity transactions.

ITC faces significant headwinds as Macquarie downgrades the stock to Neutral from Buy, slashing the target price by 34% following the government's decision to implement a sharp cigarette tax hike. The brokerage's revised assessment reflects concerns about the substantial impact on the company's core cigarette business over the next two years.

Downgrade Details and Revised Targets

Macquarie has cut its target price dramatically from ₹500 to ₹330, representing a 34% reduction. The downgrade follows the government's decision to raise cigarette taxes by 40-50%, which the brokerage believes will be particularly damaging for ITC's cigarette operations.

Expected Price Impact Across Product Portfolio

The tax hike is expected to translate into substantial price increases across ITC's cigarette portfolio. Macquarie estimates that the tax increase would result in 30-40% price hikes for key brands in the Kings and RSFT portfolio, which includes 65mm-plus length cigarettes.

The differential impact across product categories creates additional challenges:

• Longer cigarettes (75mm-plus): Require price hikes of over ₹5.00 per stick to maintain EBIT per stick
• Shorter cigarettes (sub-65mm): Need approximately 10% price increases
• Medium length products: Face close to 40% price hikes

Earnings Forecast Revisions

Macquarie has significantly reduced its earnings projections to account for the expected deterioration in business fundamentals. The brokerage has cut both FY27E and FY28E earnings per share estimates by 18% each, reflecting anticipated declines in volumes, mix and margins following the tax increase implementation in February 2026.

Competitive and Market Dynamics

The brokerage highlights that the current environment presents unprecedented challenges, noting that the industry has not experienced such sharp tax hikes alongside heightened competitive intensity in recent years. Competition, particularly from Godfrey Phillips India, adds another layer of uncertainty to the business outlook.

Higher price gaps between entry-level and premium products could hurt consumer upgrades, adversely impacting cigarette mix and overall profitability. The differential pricing requirements may skew consumer demand towards lower-priced products, further pressuring margins.

Non-Cigarette Business Outlook

Despite the challenges in the core cigarette segment, Macquarie expects some moderation to the earnings impact from ITC's diversified portfolio:

• Paperboard and packaging segment: Expected recovery in margins following anti-dumping duties implementation
• FMCG business: Potential support from broader demand recovery in FY27E
• Dividend yield: FY28E dividend yield of around 4.00% offers some downside support

However, the brokerage sees limited near-term catalysts for meaningful upside, given the magnitude of the tax shock and rising competitive pressures in the cigarette business.