Plan to Ban Tobacco FDI may Singe Cigarette Cos
Circulated a draft Cabinet note to ban FDI in licensing for franchise, trademark, brand name & management in sector
Mumbai: Shares of cigarette makers may drop on news that the government is working on a proposal to completely ban foreign direct investment (FDI) in the tobacco sector. Companies such as ITC, Godfrey Philips and VST Industries are India’s top-listed cigarette makers.
Analysts said this move eliminates the possibility of foreign companies buying stakes in local cigarette makers. News reports suggested that Japan Tobacco, world’s third-largest listed tobacco company, was in talks to acquire a part of promoter’s stake in Godfrey Phillips. “Such a news could have far and wide reaching impact in cigarette company stocks,” said Harendra Kumar, MD - Institutional Equities, Elara Capital. “Basically, government is signalling a slow death to the tobacco sector. Clearly, such steps by government indicate that in future they do not want any growth in tobacco sector and hence, it could also impact exit opportunity of investors.”
According to reports, the com-