Cigarette manufacturers are aiming to record a revenue growth of 9-10 per cent this fiscal, in line with 10 per cent posted during the last financial year, stated a report by CRISIL Ratings. This, it added, will be driven by expansion in share of the mid-premium cigarette category and a sharp growth in exports of leaf tobacco. The revenue growth assumes significance in the context of a meagre 3-4 per cent domestic volume growth.
CRISIL said that a stable tax regime and new offerings will support growth in the cigarette segment (~90 per cent of overall revenue), while lower tobacco output in key manufacturing countries will push up sales of leaf tobacco (10 per cent of overall revenue), which is primarily exported.
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Meanwhile, per analysis by CRISIL, high tobacco prices and the rising share of low margin leaf tobacco will weigh on operating margins. However, it added that a healthy product mix may help restrict the margin compression to 100-150 bps, albeit from a high base exceeding 60 per cent.
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Sustained strong balance sheets and ample liquidity will keep credit profiles of cigarette makers healthy.
CRISIL Ratings analysed the cigarette manufacturers rated by it, which account for over 90 per cent of the organised segment’s sales volume (~112 billion sticks of cigarettes sold in fiscal 2024), to report the conclusions.
Mohit Makhija, Senior Director, CRISIL Ratings, said, “Indian cigarette companies will look to grow revenue in two ways this fiscal — strategising to expand the product offerings in the mid-premium cigarette segment and seizing the opportunity for leaf tobacco exports. Innovative product offerings with new flavours and additives will drive the share of the mid-premium segment to 55 per cent this fiscal from 53 per cent last fiscal. This segment is expected to drive 6-7 per cent revenue growth for cigarette companies.
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