Surge in Cigarette Stocks After Price Increases Reported

Shares of leading cigarette manufacturers in India have experienced a notable surge, with price increases reportedly between 20% and 40%. On 18 February 2026, Godfrey Phillips India saw its stock price soar up to 12%, reaching an intraday high of ₹2,314.30. Similarly, ITC, the country's largest manufacturer, saw a rise of 1.6% to hit ₹330, while VST Industries' shares grew by 3.3%, achieving an intraday high of ₹240.

The surge followed reports indicating these companies had moved to raise prices in response to additional excise duties implemented from 1 February 2026. The new structure replaced the previous tax framework and introduced a higher Goods and Services Tax (GST) rate of 40%, along with an excise duty adjustment ranging from ₹2,050 to ₹8,500 per 1,000 cigarettes. This shift was part of the government's strategy to regulate the consumption of tobacco products effectively.

According to a report from UBS, a global investment bank, the adjustments in pricing made by ITC are likely to maintain a minimal impact on volume and earnings before interest and taxes (EBIT) in the long run. UBS highlighted that significant price hikes were particularly noted in premium cigarette categories, based on their distributor checks which indicated considerable increases.

The 84mm segment is projected to experience the largest price increase, escalating to ₹24 per stick from ₹17—an approximate 41% rise. Meanwhile, the smaller 64mm segment will see a more moderate price adjustment from ₹5.90 to ₹7, sparking discussions on how these changes will affect consumer behaviour and demand.

Analysts noted that while higher retail prices might temporarily challenge sales volumes, cigarette manufacturers generally hold strong pricing power, which enables them to protect their profit margins even in high-tax environments.

Trading activity for Godfrey Phillips saw an impressive upturn, with trading volumes increasing 4.4 times to 22.45 lakh shares compared to an average of 5.06 lakh, thereby indicating robust investor interest. As per reports, the new pricing strategy reflects a calculated approach by cigarette manufacturers to maintain revenue while adjusting to the recent tax-related challenges. The stock performance of ITC, Godfrey Phillips, and VST Industries demonstrates a recovery following a period of increased volatility brought about by the new taxation policies synchronized with their strategic pricing adjustments.