Decision to Ban Manufacture and Sale of Electronic Nicotine Devices Benefited Government and Other State-Owned Entities
Published On 10 Oct 2019 By Chinansuka Agarwal
Recently, a decision is taken by the government to prohibit the manufacturing and sale of electronic nicotine devices such as e-cigarettes, etc. across the country. The decision had direct beneficiary - Government of India, as the centre holds the direct and indirect stakes in two major companies into tobacco business, i.e. VST Industries Ltd. and ITC Ltd.
Soon after the decision, the share prices of all the companies into the tobacco business witnessed a surge, thus benefiting the government at a record notional gain of around Rs. 1,000 Crore. Some of the companies such as Godfrey Phillips India saw a rise of as much as 9%.
The share prices of ITC Ltd. rose to 1.03% in which the government and its entities hold 28.64 per cent stake. Even some of the state-owned firms such as Oriental Insurance, New India Insurance and General Insurer GIC holds 4.36% stake in ITC Ltd. thus witnessing a gain of Rs. 859 Crore after the decision was rolled out.
Similarly, the rise in the share prices of VST Industries translated into a notional gain for New India Assurance Company of Rs. 137.07 Crore. The state-owned insurance company holds around 1.53% stake in VST.
Ordinance to ban e-cigarettes became necessary as the orders were challenged in the court. After a recent high court order dismissing a plea to seek protection from Ordinance pushed the Health Ministry to order the ban.