Best Tobacco Stocks in India

The tobacco sector is a major part of the Indian economy. It contributes a huge amount of money, Rs 11,79,498 crore, to India's economy and provides jobs to about 4.57 crore people. Tobacco stocks may present an appealing opportunity for investors because of their potential for consistent returns and ability to withstand market volatility. In this blog, we will discuss the best tobacco stocks in India, the factors to consider before investing in them, and how to invest in them. 
 

What Are Tobacco Stocks?

The stocks that operate within the tobacco industry are called tobacco stocks. This sector consists of companies that are involved in growing, processing, manufacturing, distributing, and selling tobacco and tobacco-related items. Investing in top tobacco stocks in India may appeal to investors due to these companies' stable and dedicated customer base, which can make them relatively resistant to economic downturns. 

The tobacco industry is encountering stringent regulations due to heightened public health concerns. These regulations can have a substantial impact on the performance of tobacco stocks. Investors must conduct comprehensive research and carefully evaluate the risks and potential rewards before considering investment opportunities in the best tobacco stocks in India. 
 

 

List of Best Tobacco Stocks

Here is the list of the best tobacco stocks in India: 

Company Name

Industry

CMP

Market Cap

P/E

52 Week High

52 Week Low

ITC Limited (Indian Tobacco Company)

Cigarettes

₹ 423

₹ 5,28,541 Cr.

25.83

 500

399

Godfrey Phillips India Ltd.

Cigarettes

₹ 4,422

₹ 22,986 Cr.

25.46

4,444

1,620

VST Industries Ltd.

Cigarettes

 ₹ 4,097

₹ 6,325 Cr.

20.89

4,522.50

3,159.00

NTC Industries Ltd.

Cigarettes

₹ 134

₹ 161 Cr.

32.75

168 

74.0

Golden Tobacco Ltd.

Cigarettes

₹ 44.0

₹ 77.9 Cr.

11.27

63.50 

36.90

Disclaimer— All the information mentioned above is accurate as of 25th June 2024. However, it is important to conduct research before making any investment decisions in these stocks.
 

Overview of Best Tobacco Stocks in India 

Following is the overview of the best tobacco stocks in India:

ITC Limited (Indian Tobacco Company)

ITC, which was founded in 1910, is the biggest producer and distributor of cigarettes in the nation. Currently, ITC is divided into five business segments: hotels, paperboards, agribusiness, FMCG cigarettes, FMCG others, and paper and packaging. 

  • The company has reported a net profit after tax of Rs 5,187.22 Crore in the latest quarter.
  • The company has nearly no debt.
  • The stock offers a respectable 3.25% dividend yield.
  • The company has a strong history of return on equity (ROE): A three-year ROE of 27.5%
  • The company has continued to pay out a respectable 92.4% dividend.

Godfrey Phillips India Ltd

The flagship business of the KK Modi Group, Godfrey Phillips India, is among the top FMCG companies in India. They are known for several well-known cigarette brands, including Cavanders, Red & White, and Four Square. Additionally, it and Philip Morris International have an exclusive sourcing and supply relationship that allows it to produce and market the well-known Marlboro brand in India.

  • The company has nearly no debt.
  • In the last five years, the company has produced strong profit growth, with a 32.7% CAGR.
  • The company has continued to pay out a respectable 33.1% dividend.
  • The company has reported a net profit after tax of Rs 156.51 Crore in the latest quarter.

VST Industries Ltd

VST Industries is engaged inter-alia in the manufacture and trading of Cigarettes, Tobacco and Tobacco products.

  • The company is almost debt-free.
  • Stock is providing a good dividend yield of 3.66%.
  • The company has a good return on equity (ROE) track record: 3 Years ROE 28.3%
  • The company has been maintaining a healthy dividend payout of 71.7%

NTC Industries Ltd

NTC Industries Ltd., a division of RDB Industries, was established in 1931. It produces packaged cigarettes, and other tobacco products, and processes tobacco blends. It trades these goods on the domestic market and exports them to Brussels, Rotterdam, Amsterdam, Paris, and Luxembourg. 

  • The company's working capital requirements have been reduced from 334 days to 21.4 days.
  • For the quarter ended 31-03-2024, the company has reported a Consolidated Total Income of Rs 14.36 Crore, up 54.50 % from last quarter's Total Income of Rs 9.30 Crore and up 51.82 % from last year's same quarter's Total Income of Rs 9.46 Crore. 

Golden Tobacco Ltd

Golden Tobacco Limited was founded in 1930 and acquired by the Dalmia Group in 1979. Its operations include the production of real estate and tobacco products. The company as a whole also works on real estate development and business ventures. Right now, it works in real estate in Delhi, Mumbai, Andhra Pradesh, and other places.

  • As of 31-03-2024, the company has a total of 1.76 Crore shares outstanding.
  • The company has reported net profit after tax of Rs -1.55 Crore in the latest quarter.
     

Factors to Consider Before Investing in the Best Tobacco Stocks in India

Following are the factors to consider before investing in the best tobacco stocks in India:

Regulatory Landscape

Strict rules and regulations are implemented by the government worldwide on tobacco products, it is essential to grasp the potential impact of these changes on the industry. These laws can impact the earnings of the company, highlighting the need to keep up with both current and upcoming regulations.

Financial Health

Evaluating the financial performance of a tobacco company is important. Review the quarterly reports and important financial indicators including sales, profitability, debt levels, and cash flow. When making long-term investments, it's also important to assess the company’s history of dividend payments and its potential for future growth.

Competition

An intense competition is faced by the tobacco industry from both domestic and international companies. Analysing the market share and future strategies of the company you are considering is important. Understanding how a company plans to maintain or grow its market presence can provide insights into its long-term viability.

Ethical Considerations

Ethical concerns are raised by the tobacco companies because of the health risks associated with smoking, many investors choose to avoid tobacco stocks regardless of their financial stability. Before making investment in them it is important to reflect on your personal values and the ethical implications. 
 

How to Invest or Trade in Top Tobacco Stocks?

Investing in tobacco stocks involves buying shares of these companies through stock exchanges. Here are the steps to follow:

Direct Stock Investment

To invest in the best tobacco stocks in India investors can directly engage in the Indian stock market. By using an online trading platform or broker, individuals can start their investment journey after doing thorough research. 

Mutual Funds

Investors looking for professional management may choose mutual funds that contain leading tobacco stocks in their portfolios. By acquiring units of these funds, individuals can access a diversified range of tobacco companies managed by experienced fund managers.

Exchange-Traded Funds (ETFs)

For diversified exposure to the best tobacco stocks in India, ETFs are an accessible option. These funds mirror the performance of a basket of tobacco companies, offering investors the flexibility to trade them on stock exchanges like individual stocks.

Options and Futures

Sophisticated investors may want to explore options and futures contracts associated with tobacco stocks on Indian exchanges. These financial tools allow for speculating on the future price movements of tobacco stocks, serving both investment and hedging objectives.
 

Conclusion
Investing in tobacco stocks can be a lucrative venture if approached wisely. The tobacco industry is a vital component of the Indian economy, with several companies demonstrating consistent growth and profitability. However, it’s crucial to consider regulatory environments, health concerns, and economic factors before making investment decisions. By conducting thorough research and staying informed, especially through the use of a stock market app, investors can make prudent choices in the tobacco sector.

FAQs on Best Tobacco Stocks in India

The top tobacco stocks in India typically include companies with strong market positions and consistent financial performance.

Before making any investment decisions, it’s important to take into account the regulatory landscape impacting the tobacco industry, the current market demand for tobacco products, the level of competition among tobacco companies, and key financial health indicators such as profitability and debt levels.

Yes, on the Indian stock exchanges, there are ETFs that monitor the performance of tobacco stocks, offering investors a diversified exposure to this sector.

By keeping track of industry news, regulatory updates, and financial performance reports of tobacco companies can provide valuable insights.

Yes, dividends can be an important consideration for investors looking for regular income from their investments.