ITC: "Will"(s) "Gold Flake" assist "Ashirwad" to win "Bingo!"?

Aman_Jain3 · January 13, 2026, 8:40am

I think someone with a mid to long term horizon can start selling PE options of ITC and then can take a delivery if there is again any crack in the share price and wait for 6-8 quarters so that number can rebound again so price will rise. And I personally think majority of the bad news is behind us that’s my gut feeling and also due to my investment thesis.

I am shorting 300 PE February series @1.55 price with 10 lots i.e. 16000 units.
Margin required now is 5 lakhs and it can go up to 6 lakhs so I am assuming capital deployed 6 lakhs. So it can yield me around 4% in 1.5 months.

If the stock price is below my strike price I will take delivery of the stocks which would cost me 16000 x 300 = 48 lakhs. Now my view is minimum 1.5 - 2 years to maximum 4 - 5 years.
So the current sustainable EPS is around Rs16 and the impact of the increase in taxes on cigarette would lead to volume decline thereby causing operating deleverage and since cigarette’s contribution is around 75-80% to PAT and the overall impact on the PAT would be 20-25% of the cigarette’s contribution to PAT that would be close to 15-20% on the overall PAT. So the EPS can come down to around Rs13 and if the payout ratio remains at high levels i.e. 90-95% then also it is good as we have dividend yield of 4% or more and if it remains low at around 40-50% then again we can have 2% dividend yield and profit reinvested can bring in growth from other segments like FMCG which is valuation accretive.

The stock price have already corrected around 17% from the day tax news came out and the CMP is 334 and we are selling PE option of strike price 300 so we have nice margin of safety and even if goes below I have a decent plan of making yield apart from dividends and that will be selling CE options which can yield me around 2% a month and if it crosses my strike price I am happy to give delivery of the shares which I already have with me.

The only risk is absolute collapse in stock price which according to me have 0.0001%.

Ascendant · January 19, 2026, 5:24am

If you have a long term view, buy it then. Don’t sell Put Options.

A lot of people tend to think they will make money by selling Puts during a sideways move. They were making 2-4% yield for the last year when one day it dropped 9%. All profits erased. They sold more puts to collect premium.

And now it’s 20% down.

If you really are a long term investor, just keep holding and don’t take action. Else evaluate why share price has gone nowhere since last three years.

Did you buy a cigarette business at a correct valuation back then, or did you pay FMCG valuation for it.

Aman_Jain3 · January 19, 2026, 2:28pm

My take for it would be that we could always take a delivery and then be patient. Just some sort of active management can yield us extra 1-2% a month. I think by doing backtesting we can have a great idea.

Piyush_Vats · January 22, 2026, 2:18pm

Odisha government has imposed a statewide ban on all tobacco and nicotine-containing products, such as gutkha, pan masala, zarda, khaini, and more.

“A survey has revealed that as many as twice as many people in Odisha consume tobacco-based gutkha compared to the national average. This has led to a significant rise in oral and mouth cancer cases", said Mukesh Mahalinga, Odisha Health Minister, while speaking to reporters.

Terminal risk popping up slowly. To be honest, I thought tobacco lobby was too strong but clearly I was wrong. More states might follow soon.

https://www.news18.com/india/odisha-imposes-complete-ban-on-gutkha-pan-masala-and-tobacco-nicotin-products-9849825.html

Disc. Not invested currently.

omgitzvg · January 22, 2026, 2:47pm

Ban only means revenue loss for the govt. Doesn’t mean the ppl will stop using such products. Only illegal ways will prevail to get the products in people hands.

In countries like Canada and other western countries, they tried fighting marijuana use and in the end they made it legal and became a big revenue stream.

You’ll have to educate the crowd instead of outright banning them. It’s like a cycle, ban first, illegal methods increase, lift the ban or reduce the tax and we are back to square one.

Ankit_Mishra · January 22, 2026, 3:00pm

So, I think this is only for smokeless tobacco so does not impact ITC currently. No idea about the future tho.

Also, read somewhere that currently 1 in every 4 cigarette sold is an illegal one. So, raising prices is also going to hit govt tax revenues

Piyush_Vats · February 11, 2026, 11:35am

Some scuttlebutt info:

Soon after the tax hike was announced, there was immediate price hike of 10 to 20% for loose cigarettes. Smaller sticks saw more percentage hike as compared to bigger sticks. This was old stock.
Currently the price hike is in range of 30 to 50% for smaller sticks. For bigger sticks, 10 to 25%. Old stocks have been exhausted it looks like.
What I’m seeing is that a lot of people are switching to smaller sticks. Volume and value both seeing some degrowth.
There is still a lot of confusion over 10/20 sticks pack prices and retailers/paan shops are having their day in the sun.
Prices on quick commerce apps are still as per old tax regulations. Maybe old inventory leftover.

EDIT:

Pack prices for smaller sticks have gone up to 140 from 95 and for larger sticks from 340 to 440. This is interesting. In percentage terms, smaller sticks are being taxed harshly. Loosely sold small sticks prices went from 10 to 15 per stick but larger sticks went from 18 to 23 only.
There are some pretty popular foreign brands(majorly illegal) that haven’t raised pack prices so far. These packs don’t have MRP or health warnings printed on the pack. Currently one loose stick is going for 12 instead of 15. This is where the biggest risk comes in for players like ITC and Godfrey.

Disc. Invested and tracking.

Sachin_Thakur · February 11, 2026, 11:57am

Just in case govt banned cigarettes completely, what will be the share price?

Arash_Mishra · February 11, 2026, 1:34pm

Sir then the whole market cease to exist

Vignesh_Prakasam · February 11, 2026, 3:02pm

Cigarettes contribute around 80% of ITC profits still. So price will completely collapse if it were to happen . I don’t think Government is going to let go of the tax revenue honestly.

Disc: Invested

nishant_goswami · February 12, 2026, 3:37am

→ IMO, the organized cigarette market will be shaken for sure; Indian customers care about even a single penny. How come they will accept a 50% hike if cheap alternatives are available?
→ A report that is saying 27% penetration of illegal cigarettes is already there; it can reach ~50-60% with this price hike, as now there will be a huge demand from customers.

→ But here is one catch: I think illegal cigarettes can go till 35-45% max, as above 50% it will be too visible to hide.
→ Now doing some math; let’s say now 45% of illegal cigarettes are being sold in the market.

→ ITC holds 80% of the organized sector cigarette business, so before this sin tax for every 100 cigarettes being sold in India, 59 were from ITC (0.74*0.8=0.592);

74 % is the legal market share
and in that 74%, 80% is the ITC’s share
So calculation = legal market share * ITC’s share → (74/100 * 80/100 * 100) = 59;

→ Now after the sin tax, assuming the legal share drops to 55%, then ITC’s share becomes:
(55 × 0.8) = 44

→ The percentage dip in their sales =
(59 − 44) / 59 = 25%

→ Assuming the PAT from cigarettes also reduces by 25%, then:
Total PAT = 35,052 cr
Cigarette PAT (80%) = 35,052 × 0.8 = 28,041 cr

After a 25% drop:
28,041 × 0.75 = 21,031 cr

Non-cigarette PAT:
35,052 × 0.2 = 7,010 cr

Total PAT =
21,031 + 7,010 = 28,041 cr

EPS=28041/1251.6=22.40
P/E=315/22.40=14.0625
→ Now if we compare this assumed P/E with international cigarette players and regional FMCG players, it’s still cheaper.

source= PMI EV/S - Philip Morris International Inc - Alpha Spread

→ One more thing is that they don’t have debt and have a good cash flow from the cigarette business, which can be used to fund inorganic growth of their FMCG business.
→ IMO stock will go down even more after quarterly results, hence more cheaper prices.

Disclosure → invested and biased.

virajkhatavkar · February 12, 2026, 2:33pm

ITC doesn’t have 35000 crore PAT. Their annual PAT is around 20000 crore. The TTM PAT looks like 35000 because of one time profit from demerger of ITC Hotels. Their actual PE is around 19 and not 14

nishant_goswami · February 13, 2026, 5:08pm

Hi @virajkhatavkar, thanks for pointing it out.
now if we calculate with PAT of 21000 cr
PAT with cigarettes = 21000 * 0.8 * 0.75 = 12600
Non-cigarette business = 21000 * 0.2 = 4200
Total pat=16800.
EPS=16800/1251.6=13.42
P/E=315/13.42=23.6

gsapte · February 13, 2026, 6:11pm

Before this Sin Tax and Additional Tax on cigarettes, stories were in circulation, stating that, ITC is becoming more FMCG business and less Cigarette business.

At that time, I have mentioned in few comments that, an Investor should be cautious as this is still Cigarette business and not pure play FMCG or even partial FMCG business. There is long way to go.

The concern which I had was treating P/E of 25 as Normal P/E or Fair P/E. I generally believe that, P/E of below 20 is safe for ITC.

Holding ITC mainly due to good dividend yield which is my requirement, but the position will suffer and it will be long turn around time. In the past as well, there have been such massive tax hikes on Cigarettes, and ITC may able to pass these hikes to customers over next few quarters, till that time, OPM may suffer, impacting EPS growth. Next few quarters will reveal the detailed picture.

Paulbiplab · March 2, 2026, 9:30am

My response as a “Smoker” - what I have seen vices are not dependent on cost, they are like a part of life. In the nineties when I started smoking, ITC Classic was One rupee per stick to INR 17 per stick, before the tax went up. I was smoking 7-8 per day as I was young but now I am smoking 3-4 because of age-related complications, but did not give up. Added to the fact there is a new entrant for quite sometime, its no more male dominated and women smoke high quality high price cigarettes, a segment where ITC does not have much presence. Selling cigarette is not a moral game, its a cash cow for ITC and they need to play hard to keep the revenue and profitability the same, they need to tweak their offering, that’s all.

Nitin_Naudiyal · March 4, 2026, 5:43pm

Can you please share the high quality high price cigarettes where ITC is not present?

mannpatel · March 4, 2026, 6:01pm

I too think so, vices are not cost dependent, they stay with you for life. Plus, along with new entrant you mentioned, there is not more class of entrant, people shifting from bidis to cigarettes, as cigs are more aspirational to them, this shift too is huge in India. Also India has huge young population, these days even school kids are addicted to smoking, at relatively young age then they were before 10-20 years. So I think this is not a high growth market but single digit growth market for sure. Illegal cigs either fake or smuggled is the real enemy… This is my view, can be wrong too.