• Company had to close plants starting May 4: exchange filing
  • Firm challenging rule requiring 85% pictorial warning on packs

ITC Ltd., Asia’s second-largest cigarette maker by market value, has shut its factories in India to comply with rules prescribed by the nation’s top court.

The Kolkata-based company closed the plants starting May 4, when the Supreme Court ordered transferring to the Karnataka High Court of all petitions challenging the health-warning rules on packs of tobacco products, according to ITC’s exchange filing on May 5. The factories are shut until the company is in a position to comply with the interim requirements pending hearing in the state court, according to the statement.

India’s tobacco industry and the government are tussling over the regulations, which require that pictorial warnings cover 85 percent of a pack’s surface, up from 40 percent of just the front panel. At the same time, a prolonged industry closure could hurt government revenues, since taxes constitute as much as 60 percent of the selling price of cigarettes in India.

Shares of ITC, part-owned by British American Tobacco Plc, have dropped 2.2 percent this month, compared with a 1.3 percent decline in the benchmark S&P BSE Sensex index.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE