Cigarette stocks feel FDI heat, Godfrey Phillips tanks 17% intraday

Cigarette stocks led by Godfrey Phillips came under heavy selling pressure on Tuesday, falling by up to 17.4%, following reports that the government is working on a proposal to completely ban foreign direct investment (FDI) in the tobacco sector. 

Shares of Godfrey Phillips India tumbled 17.38% to Rs 933 intraday on the BSE. Among others, Golden Tobacco slipped 4.87% to Rs 39, VST Industries lost 3.21% to Rs 1,595 and ITC fell 2.8% to Rs 312.

After making it mandatory to carry larger pictorial warnings on cigarette packets, the government is now working on a proposal to completely ban FDI in the tobacco sector.

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.