Shares of cigarette-to-consumer goods conglomerate ITC closed at a three-year low on Friday, extending losses for the second straight session after the government announced additional excise duty on tobacco products effective February 1. The stock fell 3.80% to ₹350.10, following Thursday's nearly 10% plunge, as brokerages issued widespread downgrades citing concerns over demand impact from higher cigarette prices.

LIC Bears Massive Portfolio Losses

India's largest institutional investor, Life Insurance Corporation of India (LIC), has suffered substantial losses of ₹10,445 crore over two trading sessions from its significant ITC investment. With a 15.86% stake comprising 199 crore equity shares as of the September quarter, LIC's exposure to the tobacco giant has resulted in severe portfolio damage as the stock declined 14% over the two-day period.

Government Implements Substantial Tax Structure

The Finance Ministry's notification issued late Wednesday outlined a revised excise duty structure ranging from ₹2,050 to ₹8,500 per 1,000 sticks, depending on cigarette length. The announcement also included a GST hike to 40%, creating a dual impact on the tobacco industry and prompting fears of significant price increases that could dampen consumer demand.

Brokerages Issue Widespread Downgrades

Multiple prominent brokerages downgraded ITC following the tax announcement, with most shifting from bullish to cautious or bearish ratings. Nuvama downgraded the stock from 'buy' to 'hold', stating that while they expected a sharp tax hike, "the magnitude seems higher than anticipated, likely prompting consensus downgrades to ITC's cigarette volume and EBITDA estimates."

Motilal Oswal Financial Services downgraded ITC from 'buy' to 'neutral' with a revised target price of ₹400, calling the tax increase magnitude "staggering." The brokerage noted that cigarette taxes will jump approximately 50%, forcing ITC to implement price hikes of at least 25% at the portfolio level to maintain current net realisation per stick.

Business Impact and Market Outlook

ITC's cigarette business, its most profitable segment contributing over 40% to overall revenue and 80% of profits, faces significant pressure from the new tax structure. Sonam Srivastava, founder and CEO of Wright Research, noted that "since 40% of the company's revenues come from cigarettes and the segment contributes 80% of profits, the impact is expected to be significant."

Analysts remain cautious about near-term prospects, with heavy institutional selling volumes keeping sentiment negative. Market experts advise waiting for clarity on business impact and price hike implementation before considering fresh investments, as the stock may remain volatile until volume trends and consumer response become clearer.

ITC Ltd. witnessed significant institutional activity with a substantial block trade executed on the National Stock Exchange (NSE). The transaction represents a notable movement in one of India's leading tobacco and diversified conglomerate stocks.

Latest Block Trade Details

The recent block trade executed on NSE involved substantial volume and value, reflecting continued institutional interest in the stock.

Understanding Block Trades

Block trades represent large-volume transactions typically executed by institutional investors, mutual funds, insurance companies, or other significant market participants. These transactions are usually conducted to minimize market impact when dealing with substantial share quantities. The execution of such trades often indicates strategic portfolio adjustments or significant investment decisions by large stakeholders.

Market Implications

The transaction at ₹352.35 per share demonstrates the price level at which institutional participants were willing to transact in ITC shares. Block trades of this magnitude often reflect confidence in the stock's fundamentals or strategic portfolio rebalancing by institutional investors. Such transactions provide insights into institutional sentiment and can influence market perception of the stock's value proposition.