World’s top to­bacco gains on re­vamp plan

The Pak Banker - - BUSI­NESS -

God­frey Phillips In­dia Ltd., the In­dian unit of Phillip Mor­ris In­ter­na­tional Inc., said it plans to hire ad­vis­ers for a po­ten­tial re­vamp and re­ward its share­hold­ers. The world's best per­form­ing to­bacco stock ex­tended the rally.

The board of di­rec­tors, at a meet­ing on Jan. 31, au­tho­rized the Mum­bai-based com­pany to en­gage the ser­vices of a mer­chant banker or ad­vis­ers to un­der­take a study and pro­vide guid­ance for "re­or­ga­niz­ing its var­i­ous busi­nesses in or­der to ex­plore the op­por­tu­ni­ties for value en­hance­ment for its share­hold­ers," it said in an ex­change fil­ing.

God­frey Phillips shares have surged 123 per­cent in the past year, mak­ing the stock the top per­former on the 28-mem­ber Bloomberg In­dus­tries Global To­bacco Com­pet­i­tive Peers In­dex. That com­pares with a 13 per­cent slump at ITC Ltd. as higher to­bacco taxes grad­u­ally erode de­mand for cig­a­rettes. VST In­dus­tries Ltd. has de­clined 10 per­cent in the same pe­riod.

Taxes con­sti­tute up to 60 per­cent of the sell­ing price of cig­a­rettes in In­dia, mak­ing to­bacco com­pa­nies hugely sen­si­tive to the levies. Lo­cal ad­min­is­tra­tions have also been plan­ning ad­di­tional reg­u­la­tions, such as a ban on sales of loose cig­a­rette sticks, which could ad­versely hurt the in­dus­try's prospects.

God­frey Phillips' shares rose 7.6 per­cent in trad­ing as of 10:04 a.m. in Mum­bai af­ter jump­ing as much as 12 per­cent ear­lier. The bench­mark S&P BSE Sen­sex has dropped 15 per­cent in the past year. In­dia has among the high­est in­ci­dence of to­bacco-in­duced lung and mouth can­cers, and the govern­ment has long re­sorted to rais­ing taxes as a pub­lic health mea­sure. The next round of tax in­creases is likely to hap­pen when Prime Min­is­ter Naren­dra Modi presents his an­nual bud­get on Feb 29.

In De­cem­ber, a govern­ment panel headed by chief eco­nomic ad­viser Arvind Subra­ma­nian rec­om­mended a "sin, de­merit rate" of 40 per­cent on lux­ury cars, aer­ated bev­er­ages and to­bacco prod­ucts, as part of the pro­posed na­tional sales tax in­tended to unify a patch­work of lo­cal state taxes.

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