ITC, India's largest cigarette maker, plans to enter healthcare business in the country and has sought shareholder approval for the same. Healthcare is a lucrative business in India, which has the second-highest number of tobacco smokers in the world, at about 275 million people.
Read: Even passive smoking is life threatening, says study
The Kolkata-based company, which also has presence in other businesses such as hotels, paperboards, lifestyle and fast-moving consumer goods, informed the BSE about the decision in a regulatory filing on Friday, the day it announced its December quarter (Q3) results.
"Recommended for the approval of members, enlargement of the Objects Clause of the Memorandum of Association of the company to include 'healthcare', such approval to be taken by means of postal ballot and e-voting," ITC informed the BSE of its board's decision.
Cigarette sales accounted for more than half of ITC's total income in Q3, which rose to Rs 8,287 crore in Q3 from Rs 8,106 crore in the year-ago period.
"The performance of the cigarette business during the quarter was subdued on account of tight liquidity conditions prevailing in the market and continued regulatory and taxation pressures on the legal cigarette industry in India.
Over the last 4 years, the incidence of Excise Duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 118% and 145% respectively thereby exerting severe pressure on legal industry volumes even as illegal trade grows unabated," the company said in a statement.
Its net profit rose 5.7 percent to Rs 2,647 crore in comparison to Rs 2,504 crore in the corresponding period last year.
Shares of ITC closed at Rs 257 apiece on Friday on the BSE, down 2.78 percent from their previous close.
It is pertinent to add here that the overall legal cigarette business is shrinking in India, dropping to a 15-year low of 88.1 billion sticks for calendar year 2015, marking a fall of 8.2 percent from 95.2 billion stocks sold in the previous year.
Other cigarette companies in India are Godfrey Phillips India Ltd., VST Industries Ltd., Golden Tobacco Ltd. and NTC Industries Ltd.
A few days ago, British American Tobacco (BAT) announced the acquisition of the residual stake in American rival Reynolds in a $49.4 billion deal.
Earlier this month, the World Health Organisation (WHO) estimated the adverse impact of cigarette smoking at about $1 trillion every year globally.
Also, around 6 million people die every day as a result of tobacco use, most of them living in developing countries, according to the study jointly conducted by the WHO and the National Cancer Institute of the United States of America.
The joint study estimated the number of smokers globally at about 1.1 billion, with almost 80 percent of them living in low and middle-income countries.
