List of Best Tobacco Stocks in India 2024

Have you ever thought about the amount of money you spend on buying cigarettes? It will lead you nowhere. Instead, if you invest in a company manufacturing tobacco or related products, it will not only help you grow your wealth but also save you from the harmful effects on health that can be caused by smoking. While the health implications are undeniable, the industry’s financial allure cannot be overlooked.

If you are considering dipping your toes into tobacco investments, today’s blog will help you analyze India’s top tobacco stocks, their performance and how they have evolved over the years.

Overview of the Tobacco Industry in India

India is the second-biggest tobacco producer after China and is a significant player in the global tobacco industry. The industry is very important for the Indian economy as it creates jobs and contributes to the national GDP. India cultivates a wide range of tobacco variants, with the Flue-cured Virginia (FCV) variant being the prevailing and most prominent one. India is a prominent global exporter of tobacco and tobacco products, catering to nations such as the UK, Germany, Belgium, South Korea, etc. The industry produces a wide range of tobacco products, including cigarettes, bidis, chewing tobacco, and hookah tobacco. The industry is divided into organized and unorganized sectors, with the former contributing significantly to tax revenue. Despite growing awareness about health hazards, tobacco consumption remains high in India, particularly in rural areas.

Best Tobacco Stocks Based on Market Capitalisation

The top Tobacco stocks in 2024 are:

The tobacco stocks have been listed in descending order based on their market capitalization in the table below:

Best Tobacco Stocks Based on Market Capitalisation – An Overview

The best tobacco stocks in India are given below, along with a brief overview:

1. ITC Ltd.

ITC Limited is an Indian conglomerate headquartered in Kolkata, India. The company has a diversified presence across several industries, such as FMCG, hotels, information technology, packaging, paperboards and agribusiness. The company is considered the major player in the Indian economy and exports its products to over 90 countries.

ITC has a rich history that traces back to 1910 as the Imperial Tobacco Company of India Limited, a subsidiary of British American Tobacco. The company initially focused on tobacco products and established its first cigarette factory in Bangalore in 1913. The name of ITC was later changed to India Tobacco Company in 1970. The company continues to innovate and expand its FMCG portfolio while focusing on sustainability initiatives.

2. Godfrey Phillips India Ltd.

Godfrey Phillips India Ltd. (GPIL) is a prominent company in the tobacco industry. The company can trace its origins back to its parent company, Godfrey Phillips, which was established in London in 1844. This makes GPIL one of the oldest tobacco companies in the world. It was incorporated in India in 1936 and has been a significant contributor to the domestic tobacco market ever since. A significant turning point in its history was when GPIL became a part of the Modi Enterprises group, leading to strategic changes in the company’s operations. GPIL has a strong portfolio of cigarette brands, such as Four Square, Red and White, Cavanders, Tipper, and North Pole. Today, GPIL’s business revolves around cigarettes (the core business) and the production and sale of tobacco leaves. The company is also diversifying into the confectionery segment to reduce its dependence on tobacco products. 

Did You Know?

Godfrey Philips also manufacture and distributes the global cigarette brand Marlboro in India under a license agreement with Philip Morris International

3. VST Industries Ltd.

VST Industries Limited is a well-known company in India’s tobacco industry. It was previously named the Vazir Sultan Tobacco Company and has a history dating back to 1930. Vazir Sultan founded the company, initially operating as a local tobacco business. Over the years, it has expanded its operations and established a strong presence in the Indian market. The company reached a major milestone when it partnered with the British American Tobacco (BAT) group. This gave the company access to valuable expertise and resources. VST Industries primarily focuses on the production and distribution of tobacco products, particularly cigarettes. It holds a strong presence in both domestic and international markets. The company is recognized for its popular brand and wide distribution network. The company has consistently performed well financially, making it an attractive investment option for many.  

4. NTC Industries Ltd.

NTC Industries Limited, often known as the prestigious ‘House of NTC’, is one of the most famous manufacturers of tobacco products in India. Established in September 1931 in Kolkata, the company has a rich history closely intertwined with the evolution of the Indian tobacco industry. NTC is well known for its strong manufacturing capability and commitment to high-quality standards. The company has played a crucial role in introducing various innovations to the Indian tobacco market, such as the first menthol-flavored cigarette and exclusive blends for women. The company is mainly focused on manufacturing and selling cigarettes. NTC also produces matchboxes under the ‘Regent’ brand and incense sticks under the ‘Agardeep’ brand. It offers a wide range of cigarette brands, including FX, Prestige, Macpole, Marley, Royal King, etc.

5. The Indian Wood Products Company Ltd.

Contrary to the name suggesting a focus on wood products, The Indian Wood Products Company Limited is, in fact, a prominent manufacturer of Katha (Catechu) and Cutch. These natural products are derived from Khair trees and possess a wide range of applications, from food flavoring to leather tanning. Founded in 1919, the company has a remarkable history in the industry. The company was one of the first to see Katha’s potential, and it is now a global leader in production. Its headquarters is in Kolkata, India. IWP manufactures high-quality Katha and Cutch and offers products that meet the needs of a diverse customer base both domestically and internationally. The company is well-known for its high-quality products and reliable supply chain.

Performance of Tobacco Stocks

Key Performance Indicators

Benefits of Investing in Tobacco Stocks

Investing in tobacco stocks can have several advantages, some of which are listed below:

• Consistent Demand – Tobacco products often have stable demand, indicating that consumption tends to remain relatively stable even during economic downturns, leading to predictable cash flows for tobacco companies.
• Limited Competition – Strict barriers, such as stringent regulations and high capital needs, make it difficult for new businesses to enter the market, reducing competition.
• Oligopolistic market Structure – The tobacco industry is dominated by a few big companies, allowing them to raise prices and increase profits.

Factors to Consider Before Investing in Tobacco Stocks

There are various factors one should take into account before investing in tobacco stocks:

• Taxation – High taxation on tobacco products can significantly affect profitability.
• Anti-Smoking Campaigns – Government-sponsored campaigns to reduce tobacco consumption can impact the revenue of tobacco companies.
• Financial Analysis – Analysis of the company’s financial health by evaluating the company’s financial statements and other key ratios such as debt-to-equity ratios before investing.

Future of of Tobacco Industry

The industry has historically been a lucrative business and generates consistent returns. However, with the growing focus on health, coupled with stringent regulations, the industry is facing challenges. Companies are making investments in the development and promotion of innovative alternatives such as e-cigarettes, heated tobacco products, and nicotine pouches. Decreasing smoking rates, especially among young people, could affect the industry’s growth in the long run. Companies that can adapt to changing consumer preferences and evolving regulations are likely to do better than those that remain stagnant in the future.

Conclusion       

Investing in tobacco stocks requires a thorough analysis of a company’s financial statements and is a tough decision. Moreover, ethical considerations surrounding investing in tobacco stocks cannot be ignored. Investors need to weigh the financial opportunities against the social and ethical implications of their investment choices. Additionally, it is essential to stay updated on changing market conditions and keep track of any new developments in the tobacco industry. Investors should consult a financial advisor before investing.                                      

Frequently Asked Questions (FAQs)