ITC shares down 2 pc on concerns hike in prices may hit demand

Shares of ITC fell by 2 per cent today on concerns demand will be hit amid reports that the company will soon increase prices of cigarette brands like Classic and Gold Flake Kings by up to 15 per cent per pack.
The stock ended the day 2.06 per cent lower at Rs 339.10 on the BSE. During the day, it slipped 2.72 per cent to Rs 336.80.
At the NSE, it fell by 2.03 per cent to close the day at Rs 339.60.
Market participants said that selling in the stock came in amid concerns that increase in prices of cigarette brands may hit demand. Overall weakness in the broader market also pulled down the stock.

Leading conglomerate ITC will soon increase prices of cigarette brands like Classic and Gold Flake Kings by up to 15 per cent per pack following the hike in excise duty on cigarettes in the Budget 2015-16, according to sources.
Gold Fake regular is likely to be priced at Rs 78 for a pack of 10 cigarettes as against Rs 68 now, up 15 per cent, while Navy Cut brand is likely to be priced at Rs 78 for packs of 10 cigarettes pack, up 12 per cent from Rs 70 now, they added.

Global brokerage Nomura in a report said: "We highlight that in 3QFY15, ITC saw a double-digit decline in volumes on a y-y basis, which was the result of consistent and large price increases taken in a short space of time."

"Given the 15 per cent reported blended price increase is ahead of what the company would have required to offset the excise duty increase, we may see some EBIT margin improvement in FY16. However, the big caveat here is that volumes remain largely constant, which we believe is unlikely to be the case," it added.
ITC is India's largest cigarette manufacturer. ITC's cigarettes with revised prices are expected to hit market by end of the next week.
Meanwhile, the BSE benchmark Sensex ended at 28,503.30, down 427.11 points.