British American Tobacco Faces Earnings Headwinds from ITC Tax Hike

13 days ago

Bloomberg reporter

"Let's turn to British American Tobacco next. Shares are in the red there. What's driving that? >> Uh well, BAT is taking a hit because of its stake in ITC, which is the largest maker of cigarettes in India. And that company is taking a big hit because of a new excise duty to try and limit the smoking rate in India. We've got 250 million people smoking in India. That's the second highest population globally. For ITC it's not too exciting because we're talking about a tax hike of over 30% if we include other charges on cigarettes. This new tax, given that ITC gets over 40% of its revenue from cigarettes, could mean a big hit on volumes and earnings, triggering a 15% cut in earnings per share estimates for 2027 and 2028. It's a significant vulnerability for BAT, which holds about a 23% stake in ITC."

British American Tobacco is under pressure as its stake in ITC is adversely affected by a new excise duty on cigarettes in India. The significant tax hike—over 30%—is expected to reduce ITC's volumes and earnings, leading to a 15% cut in EPS estimates for 2027 and 2028, thereby negatively impacting BAT's outlook.

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