Cigarette stocks of Godfrey Phillips were under heavy selling pressure on Tuesday, dropping by up to 17.4%, after reports that the government is developing a proposal to completely prohibit foreign direct investment (FDI) in the tobacco sector.
Shares of Godfrey Phillips India fell 17.38% to Rs 933 intraday on the BSE. Among others, Golden Tobacco dropped 4.87% to Rs 39, VST Industries fell 3.21% to Rs 1,595 and ITC fell 2.8% to Rs 312. After making it compulsory to include larger pictorial warnings on cigarette packets, the government is now developing a proposal to completely ban FDI in the tobacco sector.
At present, FDI is allowed in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract in the sector.
However, it is not allowed in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes.
As per sources, the Commerce and Industry Ministry is suggesting banning FDI in licensing for franchise, trademark, brand name and management contract in the sector.
It would ultimately mean that FDI would be totally prohibited in the tobacco unit in any form.