ITC gains on buzz that smaller cigarette will drive volumes

Shares in tobacco major ITC gained on reports that the company has test launched 64mm cigarettes in UP & Bihar.

The stock traded 0.85 per cent higher on the NSE in a weak market today. There is a 40 per cent tax differential between 64 mm and 69 mm cigarette categories, and the 64 mm range is priced at a significant discount.

The 64 mm cigarette is available at Rs 3.5 per unit, while the longer 69 mm cigarette is priced at Rs 4. ITC is looking to exploit this differential to push its smaller cigarettes. Analysts expect the step up from bidis to the 64 mm cigarettes will also drive growth for the tobacco major. ITC's competitor, VST Industries, is also testing the smaller category of cigarettes in Chhattisgarh & Andhra Pradesh.