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Tobacco Products Stocks

India's tobacco sector ranks second globally in production, with 10% of the world's tobacco cultivation area. Employing 36 million people, India boasts lower production costs and a favourable global reputation for its tobacco. The sector anticipates steady growth, reaching $13.37 billion by 2028, driven by the dominance of cigarettes. However, regulatory scrutiny, health concerns, and economic factors must be considered before investing. Angel One facilitates stock investment, with ITC Ltd leading in market cap. Investors should evaluate KPIs like revenue growth and brand strength. Godfrey Phillips India Ltd emerges as a top choice, boasting a 5-year CAGR of 21.96%. Read More
Company
LTP
Volume
Market Cap
52W Low
52W High

LTP

₹ 10.5

0.50 (5.00%)

Volume

16,700

Market Cap

₹1 Cr

52W Low

₹0.00

52W High

₹10.50

LTP

₹ 4,092.05

232.35 (6.02%)

Volume

3,07,066

Market Cap

₹20,066 Cr

52W Low

₹1,620.00

52W High

₹4,288.00

LTP

₹ 430.3

0.00 (0.00%)

Volume

37,28,180

Market Cap

₹5,37,218 Cr

52W Low

₹399.35

52W High

₹499.70

LTP

₹ 148

-3.35 (-2.21%)

Volume

21,252

Market Cap

₹181 Cr

52W Low

₹72.25

52W High

₹167.80

LTP

₹ 442.05

-15.25 (-3.33%)

Volume

1

Market Cap

₹18 Cr

52W Low

₹215.25

52W High

₹766.00

LTP

₹ 29.6

0.57 (1.96%)

Volume

19,218

Market Cap

₹186 Cr

52W Low

₹21.75

52W High

₹40.50

LTP

₹ 4,310.25

-155.50 (-3.48%)

Volume

30,547

Market Cap

₹6,894 Cr

52W Low

₹3,159.00

52W High

₹4,522.50

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About the Tobacco Sector

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.

Summary

India’s tobacco sector ranks second globally in production, with 10% of the world’s tobacco cultivation area. Employing 36 million people, India boasts lower production costs and favorable global reputation for its tobacco. The sector anticipates steady growth, reaching $13.37 billion by 2028, driven by the dominance of cigarettes. However, regulatory scrutiny, health concerns, and economic factors must be considered before investing. Angel One facilitates stock investment, with ITC Ltd leading in market cap. Investors should evaluate KPIs like revenue growth and brand strength. Godfrey Phillips India Ltd emerges as a top choice, boasting a 5-year CAGR of 21.96%.

Future Outlook of the Tobacco Sector

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.

Things To Consider Before Investing in the Tobacco Sector

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.

How To Invest in the Tobacco Sector Stocks?

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.’

FAQs

What are Tobacco sector stocks?

Tobacco sector stocks represent shares in companies involved in the production, manufacturing, and sale of tobacco and related products.

Which is the top stock from the Tobacco sector in terms of market cap?

As of February 2, 2024, ITC Ltd is the top stock from the Tobacco sector with a market capitalisation of ₹5,51,015.32 crore.

How to evaluate Tobacco sector stocks?

To evaluate Tobacco sector stocks, consider key performance indicators (KPIs) such as revenue growth, market share, regulatory environment, brand strength, and cash flow.

Why should you invest in Tobacco sector stocks?

Investing in tobacco sector stocks may offer stable returns due to established market demand and consistent consumer behaviour, but it comes with ethical and health-related considerations.

Which are the best Tobacco sector stocks to invest in?

Godfrey Phillips India Ltd is one of the best Tobacco sector stocks based on 5Y CAGR. As of February 2, 2024, the company recorded a CAGR of 21.96% in the past 5 years.

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