Core Viewpoint - ITC Ltd. shares experienced a significant decline due to a government-imposed higher levy on tobacco products, raising concerns about its impact on the company's revenue and market position [1][4]. Group 1: Tax Impact - The new excise duty on cigarettes will range from ₹2,050 to ₹8,500 per 1,000 sticks, effective from February 1, leading to a tax hike of over 30% if the National Calamity Contingent Duty remains in place [1][2]. - Analysts predict that ITC may need to increase prices by at least 15% to offset the impact of the new levies [5]. Group 2: Market Reaction - ITC's shares dropped 10%, marking the largest decline since 2020, while Godfrey Phillips India Ltd. saw a 17% decrease in share price [2]. - Trading volumes for both companies surged to more than 20 times their three-month average, indicating heightened market activity and investor concern [3]. Group 3: Revenue and Sales Concerns - ITC derives over 40% of its revenue from cigarette sales, making it particularly vulnerable to the new tax burden [4]. - Historical data suggests that steep tax increases have previously led to volume drops of up to 9% for ITC, raising concerns about future sales performance [6]. Group 4: Government Policy and Health Implications - The Indian government aims to keep tobacco products expensive to discourage usage and mitigate public health impacts, with projections indicating that the economic burden of tobacco-related diseases could exceed ₹2.4 trillion ($26.7 billion) annually [6][8]. - Recent government actions include a new health and national security tax on tobacco production machinery and a ban on advertisements for tobacco products during the Indian Premier League [7].