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.

ITC Ltd. witnessed a significant block trade on the National Stock Exchange (NSE), with institutional investors executing a substantial transaction worth ₹19.27 crores.

Block Trade Details

The large-scale transaction involved key parameters that highlight the magnitude of institutional activity in ITC shares:

Market Implications

Block trades represent off-market transactions typically executed by institutional investors, mutual funds, or large stakeholders. These transactions are conducted to minimize market impact while facilitating large-volume trades. The execution price of ₹349.75 per share reflects the prevailing market conditions at the time of the transaction.

Transaction Significance

The substantial volume of over 551,000 shares changing hands in a single block trade indicates significant institutional activity in ITC stock. Such transactions often represent portfolio adjustments, stake changes, or strategic investment decisions by large market participants.

Block trades are an important component of market liquidity and provide insights into institutional investor sentiment toward specific stocks. The completion of this ₹19.27 crore transaction demonstrates continued institutional interest in ITC shares at the executed price level.