Tobacco Products Stocks

India is the 2nd largest contributor to global tobacco production, trailing only behind China. The nation dedicates approximately 0.45 million hectares to tobacco cultivation, constituting about 10% of the total global area for this purpose. On a global scale, India’s tobacco output constitutes 9% of the total production, with an average annual yield of around 800 million kilograms. Various types of tobacco, such as flue-cured Virginia, country tobacco, burley, bidi, rustica, hookah, cigar-wrapped, Cheroot, Oriental, and Chewing tobacco, are cultivated in the country.

The tobacco industry in India is a significant employer, engaging around 36 million individuals across farming, labour, manufacturing, processing, and export activities. India’s competitive advantage lies in its comparatively lower production, farming, and export costs in the tobacco sector, making it a prominent player in the industry. Moreover, Indian-manufactured tobacco is favoured globally due to its lower levels of heavy metals, tobacco-specific nitrosamines (TSNAs), and pesticide residues.

The primary states contributing to India’s tobacco manufacturing are Gujarat, Andhra Pradesh, Uttar Pradesh, Karnataka, West Bengal, Telangana, and Bihar. Gujarat, Andhra Pradesh, and Uttar Pradesh lead the production, accounting for approximately 45%, 20%, and 15% of the country’s total output, respectively. Karnataka contributes around 8%, while the remaining states collectively contribute about 2-3% to India’s overall tobacco production.

The tobacco sector in India suggests a steady growth trajectory, albeit with some distinctive characteristics. The estimated revenue of $13,370.0 million in 2024 is projected to experience an annual growth rate of 4.49% (CAGR 2024-2028). The dominance of the Cigarettes segment, contributing significantly to the market volume, reflects the popularity of this tobacco product in the country.

Compared to the global leader, China, which is expected to generate a substantial revenue of US$298,500 million in 2024, India’s tobacco market is notably smaller in scale. However, considering India’s vast population, this size is expected, and the presence of alternatives like pan masala and beedi influences the market dynamics.

Regarding per capita figures, the revenue generated per person in India is estimated to be US$11.09 in 2024, indicating a significant market presence on an individual level.

A noteworthy trend in the future of the tobacco sector is the anticipated growth of online sales, which will contribute 7.1% to the total revenue by 2024. This suggests a shift in consumer behaviour towards digital platforms for purchasing tobacco products.

Investing in the tobacco sector can be a complex decision, and potential investors should carefully consider various factors before making investment decisions. Here are some key considerations:

• Regulatory Environment: Tobacco is a heavily regulated industry due to health concerns and social implications. Investors should be aware of the regulatory landscape, potential changes in tobacco control policies, and the impact of regulations on the industry.

• Health Concerns: The tobacco industry is facing increasing scrutiny and public awareness regarding the health risks associated with tobacco consumption. Investors should consider the long-term trends related to health consciousness and potential shifts in consumer preferences away from tobacco products.

• Economic Factors: Economic conditions can influence consumer spending habits. Economic downturns may lead to reduced discretionary spending on non-essential items like tobacco products. Investors should assess the economic stability of the regions where the tobacco companies operate.

• Market Dynamics: Understand the competitive landscape, market share, and growth prospects of the specific tobacco companies you are considering. Analyse the demand for different tobacco products and how market trends may impact sales and revenue.

• Alternatives and Substitutes: Consider the presence of alternative products, such as e-cigarettes, smokeless tobacco, or emerging technologies, which might impact traditional tobacco sales. Additionally, cultural factors like the popularity of alternatives like pan masala and beedi in certain regions should be taken into account.

• Social Responsibility: Many investors today consider environmental, social, and governance (ESG) factors when making investment decisions. The tobacco industry has significant social and health implications, and investors may want to align their investments with ethical and socially responsible practices.

• Litigation Risks: The tobacco industry has faced numerous legal challenges, including lawsuits related to health issues. Investors should be aware of potential litigation risks and their financial impact on companies in the sector.

To invest in sector stocks via Angel One, follow these steps:

• Log in to your Angel One account.
• Click on the search icon and look for your desired Tobacco sector stock.
• Now, place your buy order. Simply click on the ‘Buy’ button, enter your desired quantity, and select the order type.
• To complete your transaction, click on the ‘Buy’ button.

You can track the status of the purchase from the ‘Positions’ section in the ‘Orders’ module. Once the stock is delivered, you can track its gains and losses from your ‘Portfolio.’