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Asia's No. 2 Cigarette Maker Drops After Closing India Factories

Published on Apr 4 2016 10:10 AM in A-Brands tagged: India / Tobacco / British American Tobacco / asia / ITC

Asia's No. 2 Cigarette Maker Drops After Closing India Factories

ITC Ltd., Asia’s second-largest cigarette maker by market value, slid the most in about three weeks after shutting cigarette factories in protest against a new government rule mandating bigger health warnings on its packs.

Shares in the  company part-owned by British American Tobacco Plc fell as much as 3 per cent, the most intraday since 15 March. Other cigarette makers in India are closing plants too, according to trade body the Tobacco Institute of India.  Godfrey Phillips India Ltd. declined as much as 3.8 per cent and VST Industries Ltd. dropped as much as 3.4 per cent.

ITC said it was compelled to close the plants as of Friday, when the new rules came into effect, until there is clarity on the health warning guidelines. The Kolkata-based company also flagged uncertainty stemming from legal challenges and potential modifications recommended by a parliamentary committee. The tobacco institute estimates daily industrywide losses of 3.5 billion rupees ($53 million) from factory closures.

India’s tobacco industry and the government are tussling over the regulations, which require that pictorial warnings cover 85 percent of a pack’s surface, up from 40 percent of just the front panel. At the same time, a prolonged industry closure could have some impact on government revenues, since taxes constitute as much as 60 percent of the selling price of cigarettes in India.

ITC was trading 1.7 per cent lower as of 10:51 am in Mumbai, while Godfrey Phillips was down 2.9 per cent and VST Industries declined 0.9 per cent. Golden Tobacco Ltd. fell 0.4 per cent. The benchmark BSE S&P Sensex index was up 0.2 per cent.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazineclick here.

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