Best Tobacco Stocks To Invest In India (2024)

Last Updated on May 17, 2024 by Anjali Chourasiya

The tobacco companies in India have experienced exponential growth consistently over the years and have generated significant profits. Since the past year, many tobacco stocks have recorded double-digit growth, owing to the sheer size and demand in the tobacco industry. As the tobacco sector is forecasted to grow at a CAGR of 11.94% by 2028, here are the top tobacco companies in India that will benefit from it.

List of Tobacco Companies on NSE

Note: The data is from 30th April 2024. This list of top tobacco companies in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• Market Cap: Sort from highest to lowest

Best Tobacco Shares in India (2024)

Note: The data is from 30th April 2024. This list of best tobacco shares in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• 1-yr Return: Sort from highest to lowest

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Best Tobacco Companies in India For Long-Term

Note: The data is from 30th April 2024. This list of best tobacco companies in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• 5-yr CAGR: Sort from highest to lowest

Highest Dividend-Yielding Tobacco Stocks in India

Note: The data is from 30th April 2024. This list of high dividend yielding tobacco stocks in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• Dividend Yield: Sort from highest to lowest

Profitable Tobacco Companies in India

Note: The data is from 30th April 2024. This list of profitable tobacco companies in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• Net Profit Margin: Sort from highest to lowest

Top Tobacco Companies in Q4, 2024

Note: The data is from 30th April 2024. This list of top tobacco companies in India is derived using the following parameters on the Tickertape Stock Screener – 

• Sector > FMCG > Tobacco
• Net Income (Q): Sort from highest to lowest

Overview of the Best Tobacco Shares in India Based on 1-Yr Return

Sinnar Bidi Udyog Ltd

Sinnar Bidi Udyog Ltd focuses on trading and processing tobacco, specifically in the bidi segment, which is a traditional hand-rolled Indian cigarette. As of 30th April 2024, the company had a market capitalisation of Rs. 17.34 cr. and a stock price of Rs. 433.55. The company’s net income is reported at Rs. 0.44 cr., with a return on equity of 10.74%. It has seen a 1-yr return of 101.42%. Over the last five years, the company has experienced a decrease in revenue growth and market share, highlighting challenges in scaling its operations within a competitive industry.

Godfrey Phillips India Ltd

Godfrey Phillips India Ltd is a prominent player in the Indian tobacco market, known for manufacturing cigarettes and other tobacco products. The company, as of 30th April 2024, had a market capitalisation of Rs. 17,219.35 cr. and a stock price of Rs. 3344.9. Godfrey Phillips reported a net income of Rs. 690.45 cr., and a return on equity of 21.28%. It has registered a 1-yr return of 96.95%. The company’s net income has grown impressively at a yearly rate of 34.12% over the last five years, significantly outpacing the industry average.

NTC Industries Ltd

NTC Industries Ltd, engaged in the manufacture and sale of cigarettes and tobacco products, had a market capitalisation of Rs. 135.50 cr. and a stock price of Rs. 113.4 as of 30th April 2024. The company’s net income stands at Rs. 6.33 cr., with a return on equity of 7.39%. Its 1-yr return is 49.25%. Further, the stock’s profitability score on Tickertape Scorecard is 7.5 out of 10, showing good signs of profitability & efficiency. However, the performance, valuation and growth score hasn’t fared well.

VST Industries Ltd

VST Industries Ltd is involved in the manufacturing of cigarettes and operates within the tobacco industry. The company had a market capitalisation of Rs. 6239.34 cr. and a stock price of Rs. 4029.45 as of 30th April 2024. VST Industries’ net income is Rs. 301.57 cr., and its return on equity is a robust 29.01%. It has a 1-yr return of 22.57%. The company has demonstrated solid financial performance and stability in its operational results.

ITC Ltd

ITC Ltd is a diversified conglomerate with significant interests in the FMCG sector, including tobacco, hotels, paperboards, packaging, and agri-business. As of 30th April 2024, ITC Ltd had a market capitalisation of Rs. 547,080.49 cr. and a stock price of Rs. 435.65. Its net income is an impressive Rs. 19191.66 cr., and the return on equity is 29%. The 1-yr return stands at 2.64%. ITC has shown sustained growth and is a dominant player in the tobacco industry, with a broad portfolio that spans beyond just tobacco products.

Advantages of Investing in the Top 10 Tobacco Stocks in India

• Stable cash flows: Tobacco companies often experience stable and predictable cash flows due to the inelastic demand for their products. This can be attractive to investors looking for steady dividends.
• High-profit margins: Tobacco products generally have high profit margins. This is due to brand loyalty, limited competition due to high entry barriers, and the ability to pass on tax increases to consumers without significant drops in demand.
• Market dominance: In India, a few companies dominate the tobacco market. These firms benefit from economies of scale and established distribution networks, making it difficult for new entrants to compete.

 Risks of Investing in Tobacco Shares in India

• Regulatory risks: The tobacco industry is one of the most heavily regulated in India. Regulations include advertising bans, smoking bans in public places, and graphic health warnings on packaging. These can adversely affect sales.
• Health consciousness: Increasing awareness about the health risks associated with smoking can lead to declining smoking rates. This societal shift towards health and wellness could impact the long-term demand for tobacco products.
• Legal risks: Tobacco companies are frequently involved in litigation over health issues associated with their products. These legal challenges can result in hefty fines and damage awards, impacting financial stability.
• International pressure: Global movements and treaties aimed at reducing tobacco consumption can influence domestic policies. International health campaigns and treaties like the WHO Framework Convention on Tobacco Control can prompt stricter regulations.

How to Invest in the Best Cigarette Company in India?

1. Research major players: Identifying the leading companies in the tobacco industry is essential. For instance, examining a company like ITC Limited, which commands a substantial portion of the market, involves assessing its product offerings, market strategies, and historical market performance. This analysis helps in understanding how these companies position themselves within the competitive landscape and their influence over market trends.
2. Financial analysis: Delving into the financial health of these companies involves more than just glancing at their revenue and profits. It’s important to evaluate financial ratios such as return on equity, debt-to-equity ratio, and free cash flow metrics. These indicators can provide insights into the company’s operational efficiency, financial stability, and ability to sustain dividend payouts amid fluctuating market conditions.
3. Regulatory considerations: The tobacco industry is heavily regulated. Policies affecting this sector include public smoking bans, restrictions on advertising, and health warnings on packaging. Analysing how these regulations have historically impacted company operations and market strategies can offer perspective on potential challenges and adjustments the industry might face.
4. Societal trends: Social attitudes towards smoking and health can significantly influence the tobacco market. Increasing awareness of the health risks associated with smoking may lead to a decline in cigarette consumption. Observing these trends provides an understanding of potential long-term shifts in consumer behaviour and market demand.
5. Portfolio context: Considering an investment in the tobacco industry should be contextualized within a broader investment strategy. This involves assessing the risk associated with the sector’s volatility and regulatory environment compared to other industries. Evaluating how tobacco stocks might balance or complement other investments can help in understanding overall portfolio risk and return characteristics.

Before investing, Consulting with financial professionals can provide additional depth to the analysis. Financial advisors or investment analysts can offer specialised insights, risk assessment, and guidance based on current market data and sophisticated forecasting models. Their expertise can be crucial in navigating complex investment decisions.

5 Things to Consider Before Investing in Tobacco Stocks in India

• Regulations: Governments are enforcing stricter rules on tobacco products. Consider the regulatory changes affecting the industry and possible threats to profits.
• Market demand: Tobacco use is dropping at concerning levels in many nations. Therefore, before investing in tobacco stocks, you should consider the market demand for tobacco goods and how it can affect the company’s earnings.
• Stiff competition: The tobacco sector faces fierce rivalry from both – domestic and foreign companies. Therefore, before investing in tobacco stocks, you should consider the company’s market share and its strategy for the future.
• Financial health: You should review the business’s financial performance, like quarterly reports to evaluate the performance of tobacco companies. Key parameters like sales, profitability, amount of debt, and cash flow will clearly show the company’s financial health. If you want to stay invested long-term, consider the company’s history of dividend payments and the potential for future expansion.
• Ethical aspect: Investing in the tobacco industry can fill you with ethical dilemmas. Due to the health dangers of tobacco smoking, many investors resist investing in the tobacco industry, irrespective of its potential.

Conclusion

The regulatory atmosphere impacting the potential of the tobacco industry and the increasing control by governments over tobacco products globally cause concern. Furthermore, tobacco usage is declining due to greater awareness and health concerns, posing a challenge for the industry.

Therefore, weighing the potential risks against the rewards is essential while evaluating tobacco company stocks as an investment opportunity. Careful analysis and a long-term perspective are necessary to make informed investment decisions.

FAQs

Which are the best cigarette stocks in India?

The best cigarette stocks in India, based on 1-month return are – 

– Godfrey Phillips India Ltd

– NTC Industries Ltd

Is it safe to invest in tobacco companies in India?

If you are concerned about the matter’s legality, investing in the tobacco industry is safe.

How much does tobacco contribute to the Indian economy?

Tobacco significantly contributes to India’s foreign exchange earnings, accounting for 4% of the country’s total agri exports, with an annual contribution of Rs. 4,400 cr.

Which tobacco company in India has the highest market capitalisation?

As of 13th February, 2024, ITC Ltd has the highest market capitalisation of Rs. 5,07,712.79.

Which cigarette stocks in India paid the highest dividend last year?

VST Industries Ltd paid a dividend of Rs. 140 per share in FY 2023.

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Anjali Chourasiya

I am a finance enthusiast who loves exploring the world of money through my lens. I’ve been dedicated to building systems that work and curating content that helps people learn.

As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!

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