Shares of tobacco companies in India have been showing mixed trends after the government announced an additional excise duty on cigarettes and other tobacco products. While some companies like ITC, VST Industries, and Godfrey Phillips saw their shares drop sharply, others like Elitecon International reported gains. Experts say the movement in stock prices depends on how much each company relies on domestic sales versus exports.
On January 2, 2026, shares of ITC fell by 5.11 per cent to Rs 345.35 on the BSE, hitting its 52-week low. Godfrey Phillips India’s stock declined by 4.58 per cent to Rs 2,184.60, while VST Industries dipped 2.56 per cent to Rs 248.60. In contrast, Elitecon International saw a rise of 2.4 per cent, opening at Rs 104.90 against the previous close of Rs 102.44.
The drop in shares of most tobacco companies came after the finance ministry notified amendments to the Central Excise Act. These amendments impose a new excise duty on tobacco products, which will come into effect on February 1, 2026.
Under the revised structure, cigarettes will face an excise duty of Rs 2,050 to Rs 8,500 per 1,000 sticks. The exact amount depends on the length of the cigarette. This new duty is in addition to the 40 per cent Goods and Services Tax (GST) that already applies. Previously, cigarettes were taxed at 28 per cent GST along with a compensation cess on tobacco products.
Because of this higher taxation, domestic tobacco makers are expected to face increased production costs, which can affect their profits. Investors are concerned that higher prices might reduce demand in the Indian market, which has led to a fall in stock prices for companies that rely mainly on domestic sales.
Elitecon International’s shares performed differently because the company earns most of its revenue from exports. In India, tobacco exports are zero-rated under the GST system, meaning exported products are not subject to GST. Since the new excise duty applies to domestic sales, it does not affect Elitecon International significantly.
The company exports its products to more than 50 countries. In December 2025, it signed a two-year export contract worth Rs 875 crore (USD 97.35 million) with Yuvi International Trade FZE. This large contract reassured investors and helped push the company’s shares higher in early trading.
Apart from its export business, Elitecon International is also expanding in the fast-moving consumer goods (FMCG) sector. It recently acquired majority stakes in two companies, Landsmill Agro and Sunbridge Agro, to strengthen its presence in agriculture-related products. These moves show that the company is diversifying its business, which has added to investor confidence.
Experts explain that this situation highlights how government policies affect different companies in different ways. While excise duties and taxes put pressure on companies that depend on domestic sales, firms with export-led models or diversified portfolios can continue to grow and attract investors.
In summary, the new excise duty will increase costs for domestic tobacco manufacturers, leading to lower profits and falling stock prices. Companies like ITC, Godfrey Phillips, and VST Industries are being directly affected because they sell mainly in India. On the other hand, export-focused companies like Elitecon International remain largely unaffected by the new tax, and their stocks can even rise due to strong international business deals and diversification into other sectors.
Investors are advised to consider how heavily a company relies on domestic sales versus exports before making decisions. While higher taxes can pressure some companies, those with strong export revenue or diversified businesses may continue to perform well in the stock market.
This mixed reaction shows that not all tobacco companies are impacted equally by government policies. Understanding a company’s business model, customer base, and revenue sources is important when predicting how taxes, duties, and regulations will affect its financial performance.
The overall lesson for investors is that external factors like taxation affect each company differently. Stocks of companies focused on domestic markets are likely to see volatility when taxes rise. Meanwhile, companies with international markets, export contracts, or business diversification may remain stable or even gain investor confidence despite new taxes.
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