Threat of FDI ban bears heavy on tobacco, cigarette stocks tank over 17 per cent
Mumbai: Faced with a threat following reports of the government contemplating a complete ban on Foreign Direct Investment (FDI) into the tobacco sector, cigarette stocks today witnessed a massive selling spree, resulting in a fall of up to 17.4 per cent.
Shares of Godfrey Phillips India tumbled 17.38 per cent to Rs 933 on BSE. Among others, Golden Tobacco slipped 4.87 per cent to Rs 39, VST Industries lost 3.21 per cent to Rs 1,595 and ITC fell 2.8 per cent to Rs 312.
The move, if through, will make it a double blow for the tobacco industry which is already fighting a directive by the government to carry larger pictorial warnings on cigarette packets.
At present, FDI is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract in the sector.
However, it is prohibited in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes.
According to sources, the Commerce and Industry ministry is proposing banning FDI in licensing for franchise, trademark, brand name and management contract in the sector. It would eventually mean that FDI would be totally banned in the tobacco segment in any form.
(With PTI inputs)