Shares of ITC tumbled nearly 10% in Thursday’s session, sliding to around Rs 364 on the NSE, after a sharp sell-off triggered by concerns over a steeper-than-expected hike in cigarette taxation. The stock witnessed heavy pressure following multiple sell-side reassessments of earnings and valuation.
What triggered the sharp fall?
The sharp decline came after brokerages flagged a materially higher cigarette tax increase than anticipated, raising concerns over volume growth, EBITDA margins and valuation multiples for ITC’s core tobacco business. The tax changes are expected to come into effect from February 1, prompting analysts to reassess their medium-term assumptions.
Latest brokerage view on ITC
Nuvama Institutional Equities downgraded ITC to ‘Hold’ from ‘Buy’, citing a worse-than-expected outcome on taxation. The brokerage expects a price hike of over 20% and a tax hike exceeding 30%, which it described as meaningfully sharp.
Nuvama has:
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Cut EBITDA estimates by 7% each for FY27E and FY28E
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Reduced the tobacco valuation multiple to 17x from 23x
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Assigned a sum-of-the-parts target price of Rs 415
The brokerage warned that historically, such sharp hikes have led to volume declines of 3–9%, and a double-digit tax increase could push consumers toward illicit cigarettes, impacting legal industry volumes.
Buy, hold or sell — how brokerages are positioned
Based on the latest commentary:
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Bullish stances have moderated, with at least one major brokerage shifting to Hold
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Analysts are factoring in FY27 volume and EBITDA pressure
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Near-term volatility is expected, even as some see limited impact in Q4 FY26 due to pre-buying ahead of the February implementation
Brokerages are largely in a wait-and-watch mode, awaiting further clarity on taxation details and the industry’s pricing response before revisiting estimates.
Key levels to watch
With ITC now trading well below recent highs after Thursday’s fall, the stock has entered a phase where brokerage re-ratings and earnings revisions will play a critical role in determining near-term direction.
