E-cigarettes ban: As tobacco stocks surge, this is how the government gained

NEW DELHI : The decision to ban the manufacture and sale of e-cigarettes and other electronic nicotine devices across the country had a direct beneficiary Wednesday — the Government of India. Reason: the Centre holds stake, directly and through government held entities, in at least two of the listed companies with exposure to the tobacco business — ITC Ltd and VST Industries Ltd.

As share prices of most of the tobacco firms witnessed a surge after the Cabinet decision, since these companies are seen to gain the most from the move, the government recorded notional gains of around Rs 1,000 crore over the course of Wednesday’s trade.

Share prices of some tobacco firms listed on the Bombay Stock Exchange (BSE) rose as much as 9 per cent intra-day Wednesday.

This includes even Godfrey Phillips India, which has its own portfolio of e-cigarettes for the Indian market.

For instance, share prices of ITC Ltd, in which the government and its entities own 28.64 per cent stake, rose 1.03 per cent, or Rs 2.45 apiece, to close at Rs 239.60 apiece Wednesday. While it holds 7.96 per cent stake in ITC through the Specified Undertaking of Unit Trust of India (SUUTI), state-owned insurer LIC holds 16.32 per cent stake in the company.

Though several states have banned e-cigarettes, the Ordinance was necessitated because orders were being challenged in courts. A recent HC order dismissing a plea seeking protection from an Ordinance, emboldened the Health Ministry to push for the ban.

General insurer GIC, New India Insurance and Oriental Insurance own an aggregate of 4.36 per cent in the company. The notional gain for these state-owned firms put together on Wednesday works out to around Rs 859 crore.

Similarly, share prices of VST Industries rose Rs 58.15 apiece to close at Rs 3,560 apiece. Given that New India Assurance Company holds around 1.53 per cent stake in VST, the share movement translated into a notional gain of Rs 137.07 crore for state-owned New India Assurance.