ITC dips on closure of cigarette units over uncertain health warning rules

The FMCG major announced the closure of its cigarette factories from April 1, 2016

Shares of ITC were down 1.7% at Rs 330 on the Bombay Stock Exchange after the company announced the closure of its cigarette factories with effect from April 1, 2016 until clarity emerges in the current uncertain state of the rules on health warning.

In mid October 2014 the Ministry of Health and Family Welfare in a notification said that the health warnings should occupy 85% of the front and back panels of the cigarette package. The effective date of this new warning was notified as April 1, 2015, the company said in a release.

The release also added that on March 15, 2016, the Parliamentary Committe tabled its report in the Lok Sabha, in which it recommended that the new health warnings be modified to occupy 50% of the front and the back panels of the cigarette package.

The change of health warnings on the cigarette packages involves substantial expenditure and effort. In this situation, the company, as any prudent person would, did not commit to wasting substantial resources in creating the large number of cylinders and other tools necessary for a change-over of the warnings.As a result the company is at present not in readiness to print the health warnings as now once notified, the release said.

The stock opened at Rs 327 and touched a low of Rs 326. At 11:45am, over 3.9 million shares were traded on both the stock exchanges.