KYC #01

Surya Nepal: You know the brand. Do you know the company?

Nepal’s largest private manufacturer pays out almost everything it earns, borrows nothing, and shares its table with a partner you never see on the packet.

The short version

Control sits in Kolkata. ITC Limited held 61% at March 2026, up from 59% after buying BAT’s 2% stake. The rest is Nepali shareholders, with the Rana Group on the board.
It pays out nearly everything. In FY19: Rs 988.5 crore profit, Rs 985.8 crore declared as dividends. ITC’s latest filing shows 95%.
The state takes the first cut. In FY19 a third of gross sales, Rs 1,235 crore, went in tax before profit was counted. That is more than the owners’ entire profit.
The moat is partly made of regulation. The rules meant to shrink the market also make it hard for anyone else to build a brand.

The question: Who is the senior partner in Surya Nepal: the people who own the shares, or the state that sets the price?

The numbers

Net sales: Rs 2,882 crore. FY24, after excise-type taxes. Rating-agency figure for the year to mid-July 2024.
Profit after tax: Rs 1,286 crore. Year to 14 March 2026. ITC reports INR 804 crore; we convert at the filing’s own rate (INR 1 = NPR 1.60).
Long-term bank debt: Rs 0. Debt is lease liabilities only. Gearing 0.01×. Rs 642 crore of deposits in mid-2024.
Payout: 95%. Dividend proposed for the year to March 2026 as a share of profit. In FY19 it was 99.7%.
Held by ITC: 61%. At 31 March 2026. A year earlier: 59%.
Largest company taxpayer: Rs 1,072 crore. Paid in FY2021/22, ahead of Nepal Doorsanchar (Rs 972 crore). Excise is collected on top.

01. The year it kept Rs 2.7 crore

In the year to July 2019, one Nepali company made a profit of Rs 988.5 crore.⁴

It declared Rs 985.8 crore in dividends.⁴

The gap, about Rs 2.7 crore, is what it kept. Less than three-tenths of one percent.

The same company has no long-term bank debt. Its rating agency writes of “large liquid investments”.⁷ In 2021/22 it paid Rs 1,072 crore in taxes, more than any other company in the country, Nepal Telecom included.¹⁸

You have seen its packets on the counter of a corner shop. You have probably never asked who owns the company that fills them.

So who does? And why does a business this rich keep so little?

02. A packet in every pasal

Surya Legend. Surya 24 Carat. Shikhar. Khukuri, Pilot, Bijuli, Chautari.⁷ These are among Nepal’s best-known cigarette brands, and one company makes all of them.

They are arranged like a ladder. In 2023/24 a pack of 20 Surya 24 Carat carried a maximum retail price of Rs 340, a Shikhar Filter Kings Rs 229 and a Shikhar Select Rs 124.²⁶ The most popular is not the dearest: in a nationwide pack survey, Shikhar Ice Rush came out narrowly ahead of Surya Luxury Kings, which the same survey found to be the most expensive brand.²⁶

Surya 24 Carat: Rs 340 a pack of 20 (Rs 17.00 a stick)
Surya Luxury Kings: Rs 320 a pack of 20 (Rs 16.00 a stick)
Shikhar Filter Kings: Rs 229 a pack of 20 (Rs 11.45 a stick)
Shikhar Ice Rush: Rs 229 a pack of 20 (Rs 11.45 a stick)
Shikhar Select: Rs 124 a pack of 20 (Rs 6.20 a stick)

2023/24 maximum retail prices.

Getting those packs to the counter is an operation of its own. The rating agency counts more than 150 customers dealing directly with the company, backed by warehouses across the country.⁷ The company says its network reaches over 5,000 wholesalers and 100,000 retailers.¹²

How much of the market is that? Nobody publishes a current, independent figure. Older estimates run from “over 70 percent” (2002) to “around 80 percent” of a market of roughly Rs 2,000 crore a year (2014).^33,14 The company’s own profile has claimed over 90 percent.²⁹

A word before we go on. This is an investigation of a business, not an endorsement of its product. WHO figures and the government’s 2018 factsheet, as reported in Nepal’s press, attribute about 27,000 deaths a year to tobacco.²³ That sits behind everything that follows.

That is the brand. The packet does not say who owns the company.

03. The packet doesn’t say

The legal entity is Surya Nepal Private Limited, which calls itself an Indo-Nepal-UK joint venture that started operations in 1986.^9,13 Its own register of owners is not public. Its parent’s accounts are.

At 31 March 2026, ITC Limited, the Kolkata-based Indian conglomerate, owned 61 percent. A year earlier it owned 59.^2,3 The rest is held by Nepali individuals and institutions, a group no filing we could read names. Until this year it also included a 2 percent stake held by British American Tobacco’s investment arm, which the rating agency listed through June 2025.⁷ ITC bought that stake in the year to March 2026.²

ITC Limited (61%). Controls the board. Chairman Sanjiv Puri is also ITC’s chairman and managing director. ITC held 49% until August 2002, 59% until FY2025 and 61% at 31 March 2026, after buying BAT’s 2%.
Nepali shareholders (39%). A group the rating agency does not name. The Rana Group of Shareholders has two representatives on the board (Siddhartha SJB Rana since 2002, Sashi Raj Pandey since 2009).
BAT (Investments) UK (2% → 0). CARE listed 2% through its June 2025 report. ITC’s FY2026 accounts record ₹154.22 crore of “investment purchased” from British American Tobacco (Investments) Limited, the same sum as its “acquisition of non-controlling interest”, and ITC’s holding rose from 59% to 61%. The date and share count are not disclosed. BAT remains ITC’s largest shareholder, at about 22.9%.
Cigarettes. The profit engine. Two factories: Simara in Bara, and Seratar in Tanahun, built in 2014 as a “backup”. The rating agency says other businesses contribute little.
Leaf. Nurseries, seedlings and curing sheds for Nepali growers. What it cannot buy at home comes through ITC’s Agri Business Division. No farmer count is published.
Foods. Sunfeast Dark Fantasy cookies, made in Nepal since October 2023. A foods factory at the old Biratnagar garment site is reported.
Surya Nepal Ventures. A wholly owned subsidiary formed in 2023. Makes agarbatti at Nitanpur, Bara. Chaired by the managing director.
Hotel. An ultra-luxury hotel at Budhanilkantha is reported at Rs 600 crore approved, near Rs 1,000 crore all-in. A public notice for its environmental assessment exists. Nothing is built yet.
The state. Excise and Health Risk Tax on every stick, then income tax and VAT. In FY19 the first layer alone was Rs 1,235 crore, more than the profit.
The owners. Nearly all profit is paid out. Latest filing: about Rs 1,222 crore, of which ITC’s 61% is about Rs 745 crore and everyone else’s about Rs 476 crore (our arithmetic).
Reinvestment. Funded from the same cash flow: the Rs 400 crore Seratar plant, and a hotel that would be larger.

Three words get confused here, so let’s separate them. Control is who runs the board: ITC. Its chairman and managing director, Sanjiv Puri, is also Surya Nepal’s chairman.⁹ Ownership is who holds the shares: 61 percent ITC, the rest mostly Nepali. Economic value is who receives the cash, which follows the shares once the state has taken its cut.

The trail is in ITC’s accounts. Its related-party note lists an “investment purchased” from British American Tobacco (Investments) Limited, the entity the rating agency names as the 2 percent holder, for ₹154.22 crore in the year to March 2026, and nothing the year before. The same sum appears in ITC’s cash-flow statement as “acquisition of non-controlling interest”, and ITC’s holding rose from 59 to 61 percent.² 61 plus Nepali holders’ 39 is 100.

The counterparty, the amount, the cash-flow line and the two-point rise all describe one transaction: ITC buying BAT’s direct stake in Surya Nepal. ITC does not give the date or the share count, and the related-party line does not name Surya Nepal. We come back to the price in section 9.

How does a Kolkata conglomerate come to control a factory in Bara? Start before the factory.

04. A state factory, a royal licence and a closed door

For much of the twentieth century, tobacco in Nepal was a palace matter. According to a peer-reviewed history of Nepali tobacco politics, the King authorised the country’s first cigarette manufacturer in 1948. In the 1960s and 70s, China and the Soviet Union part-financed a state-owned factory at Janakpur, inaugurated in 1965.³³ Until 1983, the study says, the industry was mostly state-owned.³³

The state model did not last. When Janakpur formally closed in June 2011, about 900 staff were still turning up to sign the attendance register, with no work to do. Employees blamed political interference.³⁰

Foreign tobacco came in through a side door in the 1980s. The same study says the palace first kept British American Tobacco out and then, after lobbying, let it in alongside the Imperial Tobacco Company (ITC) through a joint venture with a Nepali firm, Surya Tobacco Company.³³ Philip Morris followed in 1985 through Seti Cigarette Factory.³³

Those two names matter. ITC, established in 1910, is India’s largest cigarette maker.⁷ BAT is still its largest shareholder, at about 22.9 percent after a block sale in May 2025.^27,28

So the Nepali story starts with a gap: a market served by an exhausted state factory and imports, and two foreign groups that knew how to run a cigarette business and needed a local partner and a licence to do it.

Who sat on the Nepali side of that table?

05. Who sat across the table

By 2001, the Nepali partner’s stake sat inside the Soaltee Group, through an investment vehicle called Surya Enterprises, which also held stakes in the Soaltee Hotel and the Himalaya tea estate.³²

The same Nepali Times article reported that the royal family had investments in some Soaltee Group companies. The group’s chairman, Prabhakar Rana, said neither the king nor members of the royal family owned shares directly.³² The peer-reviewed study goes further, naming Prince Gyanendra, king from June 2001, as a part-owner of Surya Tobacco and a tobacco businessman since the 1980s.³³ The two accounts do not match. Public documents cannot settle it; the company registrar’s shareholder file would.

The Rana Group. August 2002: sold 10% (56,000 shares of Rs 100) to ITC. ITC went from 49% to 59% and Surya Tobacco became Surya Nepal, an ITC subsidiary.^8,31 Control moved to the foreign partner for good. The Rana Group still has two representatives on the board.⁹
Sanjiv Puri. The record does not say what he decided there. It says where it led. He is now chairman and managing director of ITC, and has chaired Surya Nepal since February 2017.⁹ The parent’s most senior executive knows this subsidiary from the inside. That shapes how closely it is run.
Gaurav Tayal. ITC sent the former head of its matches and incense business, who joined as COO in October 2025.^9,35 He chairs the incense subsidiary, Surya Nepal Ventures.⁹ A diversification specialist at the helm of a company the rating agency calls highly concentrated in cigarettes. It suggests the non-cigarette side is meant to grow.

One more episode belongs here, because it shaped how the company deals with the state. In 1998, the Inland Revenue Department said Surya Tobacco had underpaid taxes by Rs 13.6 crore between 1993 and 1998. The company refused and went to court. A two-judge panel ruled it did not have to pay. The department appealed; according to the study, the appeal failed in 2009.³³ The study describes the case as “the most controversial in Nepal’s judicial history”, because of the royal shareholder link. We could not find the company’s own account.

What we could not find: the names of the other Nepali founders. The company registrar’s file would list them. That request is open.

A company born of two foreign groups, a palace-adjacent partner and a tax dispute. Then it grew. What actually changed its course?

06. Six decisions

First, the whole story on one line. Click an event for why it mattered.

1948: A palace-licensed cigarette factory. The King authorised Nepal’s first cigarette manufacturer. Tobacco began as a licensed monopoly, not a market.
1965: The state factory at Janakpur opens. China and the Soviet Union part-financed it. It formally closed in June 2011 (one study says 2013) with about 900 staff still signing in and no work.
1986: Surya Tobacco Company starts operations. A joint venture with ITC and BAT behind a Nepali partner. Other sources say 1983 or 1985; the company and its rating agency say 1986.
1998: The Rs 13.6 crore tax fight. The tax department said the company underpaid by Rs 13.6 crore (1993 to 1998). A two-judge panel sided with the company. The appeal failed in 2009, per a peer-reviewed study.
2002: ITC takes control. On 20 August the Rana Group sold 10%: ITC went from 49% to 59%. Surya Tobacco became Surya Nepal. The Nepali Times called it the largest manufacturer in Nepal, with zero debt.
2004: The garment detour begins. A new export factory, about Rs 30 crore. By 2010/11 it turned over Rs 100 crore, exported 85% and employed about 650.
2011: The garment factory closes. After a three-month labour stir and an episode in which workers locked up 37 managers, the board shut it in August. The first diversification was over.
2014: A second cigarette plant, Rs 400 crore. Seratar, Tanahun: 145 ropani, 250+ jobs, built as a “backup” for Simara and aimed partly at Gulf exports.
2020: Lockout, then a dip. Production stopped on 24 March. Net sales fell 2.7% in FY20 and stayed flat in FY21, the only fall in the series we have.
2022: Top taxpayer; a court loss. Rs 1,072 crore in taxes, the largest of any company. On 28 August the Supreme Court dismissed an industry petition against 90% pack warnings.
2023: New arms: incense and biscuits. Surya Nepal Ventures (incense, Bara) was formed in July. Sunfeast Dark Fantasy cookies, made in Nepal, launched in October.
2025: Orders, unrest, a new managing director. On 14 July the tax department set aside Rs 66.8 crore of old demands. September’s unrest passed; ITC called Surya “resilient”. A 100% warning directive is blocked by an interim order. Gaurav Tayal became MD in December.
2026: ITC buys out BAT’s 2%. In the year to 31 March, ITC’s accounts show ₹154.22 crore paid to British American Tobacco (Investments) Limited, and ITC’s holding up from 59% to 61%. BAT is no longer a direct owner. The date is not given.

The history is easier to follow as a set of bets. Each card below shows the decision, what management was after, what happened and what it changed.

1986: Entering a state-run market. The decision: Set up a privately owned, branded cigarette factory at Simara with ITC and BAT behind it. The bet: That a consistent, advertised product could win a market served by an ageing state factory and imports. (Our reading.) The result: By 2002 the Nepali Times called it the largest manufacturing company in Nepal, with zero debt. A 2002 estimate put its share above 70%. The aftermath: Everything since has been about defending that position.
2002: Handing over control. The decision: The Rana Group sold 10%, 56,000 shares of Rs 100, to ITC. The bet: That ITC’s capital, leaf supply and know-how were worth more than Nepali control. (Our reading.) The result: ITC rose from 49% to 59% on 20 August 2002. Surya Tobacco Company became Surya Nepal Private Limited, an ITC subsidiary. The aftermath: The company has run on ITC’s model ever since. Nepali holders kept 39% and board seats.
2004 to 2011: The garment detour. The decision: Use the cigarette cash to build an export garment factory, about Rs 30 crore, in 2004. The bet: A second business that earned foreign exchange and did not depend on tobacco law. The result: By 2010/11: Rs 100 crore turnover, 85% exported, about 650 jobs. Then a three-month labour stir; in June workers locked up 37 managers; in August the board closed it. The aftermath: The first diversification died in a season. The old site is reported to house the new foods factory.
2014: The backup plant. The decision: Build a second cigarette factory at Seratar, Tanahun: Rs 400 crore, 145 ropani, 250+ jobs. The bet: Resilience: a second site, in the hills, for a business whose Simara plant faced strike threats. (Our reading; the company called it a “backup”.) The result: It began production in 2014, the company’s first plant in the hills. The company lists green-building and safety certificates for it. The aftermath: Two plants are an insurance policy paid for out of cash flow, not debt.
2011 to 2025: The packet war. The decision: Contest ever-larger pictorial warnings in court and with ministers, per public-health researchers’ account. The bet: In the rating agency’s words, large warnings leave “practically no space” for a trademark and tilt the field toward smuggled packs. The result: The Supreme Court dismissed industry cases in December 2013, and in August 2022 a petition by a company described as backed by Surya Nepal. 90% warnings are the largest in the world. In 2025 Surya Nepal went to court against a 100% directive; an interim order blocks it. The aftermath: The fight is as much strategy as law: win some, lose some, buy time. (Our reading.) The Health Ministry says it will revive the directive.
2025: Clearing the decks. The decision: In one financial year: old tax demands withdrawn, BAT bought out, a new managing director. The bet: That Nepal remains worth long-term capital after a year of political shocks. In September, Surya Nepal and ITC publicly said they would keep investing. The result: On 14 July the tax department set aside Rs 66.8 crore of demands raised on “alleged theoretical production of cigarettes”. ITC bought out BAT’s 2% for ₹154.22 crore and reached 61%. ITC called Surya’s September performance “resilient”. The aftermath: Too early to judge. The open question: what a larger ITC stake means for how profit is shared.

Those were the decisions. Here is the machine they built.

07. How a packet becomes profit

Start at the farm. Surya Nepal runs a leaf-development programme: seedlings, nurseries and curing sheds for tobacco growers.¹² It does not say how many farmers. The leaf it cannot buy at home comes through ITC’s Agri Business Division.⁷

Then two factories: Simara, in Bara, and Seratar, in Tanahun, the second built as a “backup” for the first.¹⁴ Then roughly 150 direct customers. Then thousands of wholesalers. Then more than 100,000 shops.^7,12

Now the part that does the work: tax. Cigarettes in Nepal are taxed by the stick. The Health Risk Tax was doubled to 50 paisa a cigarette in 2020/21.⁴ The rating agency says the burden has more than doubled in every segment in recent years and more than trebled in the plains.⁶

FY18: Rs 2,423 crore
FY19: Rs 2,514 crore
FY20: Rs 2,447 crore (Lockout from 24 March)
FY21: Rs 2,449 crore
FY22: Rs 2,701 crore
FY23: Rs 2,899 crore
FY24: Rs 2,882 crore

Income from operations, net of excise-type taxes. Source: CARE Ratings Nepal.

Notice what this chart does not show: growth. Net sales rose from Rs 2,423 crore in FY18 to Rs 2,882 crore in FY24, about 3 percent a year.^4,5,6,7 The FY20 dip is the lockout, which stopped manufacturing from 24 March to 14 June 2020.⁴ The 10 percent rise in FY22 came in a year of higher taxes; the rating agency credits the “introduction of new brands”.⁶

FY19 is the one year the rating agency gives in full. Gross sales Rs 3,747 crore; after taxes, Rs 2,512 crore; profit before depreciation, interest and tax Rs 1,619 crore, a 64 percent margin on net sales; profit after tax Rs 988.5 crore, 39 percent.⁴

Margins like that come from three things working together: a product people keep buying at almost any price, a brand ladder that catches every wallet, and a market few others can enter. The rating agency calls the non-cigarette businesses a small share of income and says Surya’s scope to fall back on them is “negligible”.⁷

Margins that fat deserve suspicion. So follow the money.

08. Revenue in, dividends out

Here is where a cigarette rupee goes. Switch between the last year the rating agency itemised (to July 2019) and the latest filing (to March 2026), and click any stage.

Year to July 2019

Revenue: Rs 3,747 crore. Gross sales Rs 3,747 crore. Before profit is counted, Rs 1,235 crore (33%) leaves as taxes, more than the entire profit. What remains is net sales of Rs 2,512 crore.
Operating costs: Rs 895 crore. Costs to make and sell the product take Rs 895 crore. That leaves Rs 1,619 crore before depreciation, interest and tax: 64% of net sales, a margin most manufacturers never see.
Profit after tax: Rs 989 crore. Depreciation, interest and income tax absorb Rs 630 crore. Profit after tax is Rs 988.5 crore, up 7.7% on FY18’s Rs 918 crore.
Cash: Rs 784 crore. Liquid investments of Rs 784 crore plus Rs 2.7 crore cash. No long-term bank debt; gearing 0.04×. Rs 575 crore of working-capital lines sit mostly unused.
Dividend or reinvest: Rs 985.8 crore. Dividends declared: Rs 985.8 crore, 99.7% of profit. The company kept about Rs 2.7 crore on paper. Reinvestment, like the Rs 400 crore plant in 2014, comes out of future cash flow.

Year to 14 March 2026

Revenue: Rs 5,664 crore. ITC reports turnover of INR 3,540 crore (Rs 5,664 crore), including other income. It is not the rating agency’s net-of-tax measure and the two should not be compared year to year.
Operating costs: Rs 3,807 crore. Everything between turnover and pre-tax profit: Rs 3,807 crore. ITC does not itemise it. If its turnover is gross of excise, as the FY19 comparison suggests, most of this is tax. That is our inference.
Profit after tax: Rs 1,286 crore. Pre-tax profit Rs 1,856 crore, income tax Rs 570 crore (30.7%), profit after tax Rs 1,286 crore. About 4% a year above FY19’s Rs 988.5 crore, though the periods differ.
Cash: n/a. ITC’s table gives no cash line. It does show total assets of Rs 2,050 crore against liabilities of Rs 665 crore and equity of Rs 1,385 crore. The last cash figure from the rating agency: Rs 683 crore (mid-2024).
Dividend or reinvest: Rs 1,222 crore. Proposed dividend, including amounts paid during the year: Rs 1,222 crore, 95.0% of profit. ITC’s 61% is about Rs 745 crore; the other holders’ 39% about Rs 476 crore.

Three things stand out.

Cash is parked, not hoarded. Liquid assets, mostly bank deposits, were Rs 784 crore in July 2019, Rs 1,015 crore in July 2022 and Rs 683 crore in July 2024.^4,6,7 It holds Rs 575 crore of credit lines it barely uses, and no long-term loans.^5,7

Payout is the capital-allocation policy. It declared Rs 985.8 crore of dividends in FY19 and Rs 1,040 crore in FY22.^4,6 ITC’s latest table shows 95 percent.¹

Reinvestment comes from the same pot. The Rs 400 crore Seratar plant and the planned hotel are funded, the rating agency says, from “strong cash flows from the business”.⁷

The result is an odd ratio. In the latest filing, Surya Nepal earned Rs 1,286 crore on equity of Rs 1,385 crore: a return on closing equity of 93 percent. That is not magic, it is arithmetic. A company that hands back nearly all its profit never accumulates much equity.

If the company keeps almost nothing, who gets it?

09. Where the money ends up

Of the Rs 1,222 crore dividend in the latest filing, ITC’s 61 percent is about Rs 745 crore. The other 39 percent, about Rs 476 crore, goes to everyone else. Converted at ITC’s own rate; assumes dividends follow shareholding.

For ITC, Surya Nepal is a small number with a very good margin. It contributes 2.28 percent of ITC’s consolidated profit and holds 0.46 percent of its net assets.² To Kolkata it is a rounding error. To Nepal it is, in its rating agency’s words, the largest private-sector manufacturing enterprise.

What does ITC bring? Per the rating agency: tobacco leaf through ITC’s Agri Business Division beyond domestic purchases; research and development for “product and packaging solutions”; and “significant business and management expertise”.⁷ Per the shelf: biscuits and incense sold under brands ITC also sells in India.^22,35

Back to the ₹154 crore. It is what ITC paid BAT (Investments) for the two points, going by the matching entries in section 3, and Surya Nepal is the only continuing subsidiary whose ownership percentage changed that year.² If the whole sum bought those two points, 100 percent of the company is valued at about ₹7,700 crore, or Rs 12,338 crore: 9.6 times FY26 profit and 8.9 times book value. That is our arithmetic. ITC does not give the date or share count, and if the price included anything else, the valuation changes. Medium to high confidence.

BAT moved on both fronts in the same financial year. It sold about 2.5 percent of ITC itself in a May 2025 block sale and stayed ITC’s largest shareholder, and it sold its direct 2 percent of Surya Nepal to ITC.^27,2

What does it mean for Nepal? The cash the business generates is shared three ways. The state first: Rs 1,072 crore in taxes counted by the Inland Revenue Department in 2021/22.¹⁸ The only year itemised, 2019/20, was income tax of Rs 531 crore plus VAT of Rs 387 crore.²⁰ Excise duty on every stick comes on top. Then ITC, at about Rs 745 crore in dividends in the latest year. Then Nepali shareholders, about Rs 476 crore. The years differ, so treat this as a sketch, not a ledger. The sketch says the largest cheque goes to the Inland Revenue Department.

That is the connection. But Surya Nepal also makes things that are not cigarettes. Or is that not quite true?

10. Incense, biscuits, leaf and a hotel

Incense. Surya Nepal Ventures, a wholly owned subsidiary formed in July 2023, makes agarbatti at Nitanpur in Bara.^1,9 Mangaldeep, an ITC brand, is among its products.^21,35

Biscuits. The first Sunfeast Dark Fantasy cookies made in Nepal arrived in October 2023.²² Nepal Khabar reports a foods factory in Biratnagar, at the site of the old garment unit, opened in 2023/24.²¹

A hotel. Surya Nepal has published a public notice to scope an environmental impact assessment for a “Hotel & Restaurant” project.¹¹ Nepal Khabar reports Department of Industry approval of a Rs 600 crore investment in October 2021, 65 ropani of land and an all-in cost near Rs 1,000 crore for an ultra-luxury five-star at Budhanilkantha.²¹ The rating agency has noted the hotel plan since 2020.⁴

Leaf exports. Nepal Khabar says Surya Nepal exports locally grown tobacco to Turkey and South Korea.²¹ We could not find a verified export value, so we treat it as small and unproven.

None of it is large yet. A hotel at Rs 600 crore to Rs 1,000 crore would be the biggest single bet since the Rs 400 crore plant, and it would do something the dividend never does: turn cash that leaves every year into an asset that stays.

While those bets mature, what protects the core?

Eight things most readers don’t know

Open a card for why it matters.

In the year to July 2019, Surya Nepal earned Rs 988.5 crore and declared Rs 985.8 crore in dividends. It kept about Rs 2.7 crore. Why it matters: It is a distribution machine. Value is created in the company but lives with its owners, so the company itself stays small.
A third of its gross sales that year, Rs 1,235 crore, left as taxes before profit was counted. That is 1.25 times the profit. Why it matters: The state is the biggest single claimant on the cigarette rupee, ahead of the people who own the factory.
Before depreciation, interest and tax, the margin was 64% of net sales. Why it matters: Few manufacturers anywhere earn that. It points to pricing power and a thin field of competitors, not to efficiency alone.
The man who ran Surya Nepal as managing director from 2001 to 2006, Sanjiv Puri, is now chairman and managing director of ITC, and still chairs Surya Nepal. Why it matters: The parent’s top executive knows the subsidiary from the inside. It is a rare, long reporting line.
Nepal’s largest private manufacturer is only 2.28% of ITC’s consolidated profit and 0.46% of its net assets. Why it matters: Small to Kolkata, huge to Nepal. Decisions that matter here may look like rounding errors there.
In July 2025 the tax department set aside Rs 66.8 crore of demands raised on “alleged theoretical production of cigarettes”. Why it matters: The demands rested on what a factory could have made, not what it sold. Per ITC they were pending on the Supreme Court’s directions and were closed in the company’s favour.
ITC bought control in 2002 with 56,000 shares of Rs 100, which was 10 points. That implies paid-up capital of about Rs 5.6 crore. Today it is Rs 201.6 crore. Why it matters: Capital rose 36-fold while the company paid out nearly everything in recent years. The usual route is bonus shares issued from reserves (our reading); the filings do not say.
Its own rating agency says advertising bans “make it hard for any new entrant to gain brand awareness”. Why it matters: Rules designed to shrink smoking also protect the company with the best-known brands. That is the contradiction at the centre of this story.

11. Why it is hard to compete

Five things, each with the evidence we found and its weak spot. No scores: nobody publishes the data to score them fairly.

Brand. A ladder from Rs 6.20 to Rs 17 a stick, with heritage names (Bijuli, Chautari, Khukuri) and newer ones (Ice Rush, Fusion). The rating agency calls it “strong brand equity”. Weak spot: Warnings now cover 90% of a pack, leaving “practically no space” for a trademark.
Distribution. More than 150 customers deal directly with the company, with warehouses across Nepal. The company claims 5,000+ wholesalers and 100,000+ retailers. Weak spot: The wider network count is a company claim; no independent census exists.
Manufacturing. Two plants, one built as a backup. ISO certificates and an integrated laboratory are listed (self-reported). Weak spot: One main product. Labour disputes at Simara (2012) and the 2011 garment collapse show the plant is not insulated.
Capital. No long-term bank debt, about Rs 683 crore liquid at mid-2024, Rs 575 crore of lines, and the top short-term rating (CARE-NP A1+) every year since 2019. Weak spot: It pays out almost everything, so there is little accumulated equity.
Parent. ITC procures leaf beyond domestic supply, supplies R&D for “product and packaging solutions” and “management expertise”. BAT, which sold its direct stake to ITC in FY2026, remains ITC’s largest shareholder. Weak spot: The benefits are real, and so are the dividends that flow back.

12. What could break it

Levels below are our assessment, with the reason for each. Click a row for what would change our mind.

Regulation: HIGH. The 100% pack-warning directive was approved in February 2025 and is blocked only by an interim order. The Health Ministry says it will revive it. Courts have ruled against the industry before (2013, 2022). What would change our view: A final Supreme Court ruling in the company’s favour would lower this. A lifted order would raise it.
Tax: HIGH. The rating agency says the burden has more than doubled in every segment and more than trebled in the plains. Public-health researchers want a 35% to 60% excise rise. The 2026/27 budget’s cigarette rate is reported inconsistently, so we quote none. What would change our view: Stable rates for three years would lower it.
Concentration: HIGH. The rating agency: if cigarettes are hit, the company’s scope to fall back on other businesses is “negligible”. What would change our view: A hotel or foods arm earning real profit would lower it. Neither does yet.
ESG and reputation: HIGH. Tobacco causes about 27,000 deaths a year in Nepal, per WHO and the 2018 national factsheet as reported. The company is on record contesting health labelling in court and with ministers. What would change our view: Little. Reputation here is structural, not event-driven.
Consumer behaviour: MEDIUM. Cigarettes are price-elastic and many smokers also use cheaper smokeless products, says the rating agency. NDRI argues the last two excise rises did not dent volumes. The evidence conflicts. What would change our view: Two more years of volume data would settle it.
Competition and illicit trade: MEDIUM. The company argues high taxes feed smuggling. An independent 2021 retail survey found 0.33% of packs illicit. It was one year and one method. The state factory at Janakpur is gone. What would change our view: A national, repeated pack survey would settle it either way.
Operations and politics: MEDIUM. Strikes in 2011 and 2012; September 2025 unrest. ITC called Surya Nepal “resilient” through it, and both companies said they would keep investing. What would change our view: Another disruption of that scale without damage would lower it.

Put the risks next to the moat and a contradiction appears.

13. The rules that shrink the market defend the incumbent

In 2020 the rating agency listed the reasons nobody can easily compete with Surya Nepal. One stands out: “Advertising restrictions imposed on electronic and print media makes it hard for any new entrant to gain brand awareness.”⁴

Read that again. The advertising ban exists to reduce smoking. A side effect is that nobody new can build a brand. The same goes for packs that are mostly warning, for a tax system that rewards scale, and for a market whose one state-run rival, Janakpur, has shut.

Now the second half. The state is not neutral. In FY19 the gap between gross and net-of-tax sales was Rs 1,235 crore: 1.25 times the owners’ entire profit.⁴ Government tobacco-tax revenue rose from Rs 2,590 crore to Rs 3,060 crore between 2021/22 and 2022/23.²⁶ A regulator that wants fewer smokers is, on FY19’s numbers, also the biggest financial beneficiary of each pack sold.

That is the contradiction. The state is Surya Nepal’s regulator, its biggest financial partner and its main constraint, all at once. The company has contested the state’s health rules in court since 2011. Both sides are acting rationally. Neither can easily stop.

Both sides have a case. Public-health researchers argue taxes are still too low: tobacco tax is 41 percent of the retail price in Nepal, against 58 percent in India.²⁶ The company’s reply, in the rating agency’s words, is that higher taxes push smokers toward “cheaper and largely tax evaded tobacco products”.⁷ An independent 2021 pack survey found 0.33 percent of packs illicit; it was one year and one method.²⁶

So what does all this add up to, in money?

14. What forty years of this adds up to

Put it through the financial statements and four sentences fall out.

Of every Rs 100 of gross sales (FY19): Rs 33 taxes netted off before profit. Excise-type taxes: Rs 1,235 crore of Rs 3,747 crore gross sales (FY19).
Of every Rs 100 of gross sales (FY19): Rs 24 operating costs. Rs 895 crore.
Of every Rs 100 of gross sales (FY19): Rs 17 depreciation, interest, income tax. Rs 630 crore.
Of every Rs 100 of gross sales (FY19): Rs 26 profit, paid out to owners. Rs 988.5 crore profit; Rs 985.8 crore declared as dividends.

It earns like a market leader with few rivals. A 64 percent margin before depreciation, interest and tax in FY19.⁴

It pays out like a utility. 99.7 percent of profit in FY19; 95 percent in the latest filing.^4,1

It grows like a mature business, too. Net sales rose about 3 percent a year from FY18 to FY24; profit about 4 percent a year from FY19 to FY26, on different year-ends.^4,5,6,7,1

The state is paid first. At least a third of every gross rupee in FY19 went to the state before profit; add income tax and the owners’ quarter looks small.⁴

: 2002 / 2019 / 2026
ITC holding: 49% to 59% / 59% / 61%
Paid-up capital: about Rs 5.6 crore (implied) / n/a / Rs 201.6 crore
Profit after tax: n/a / Rs 988.5 crore / Rs 1,286 crore
Payout: n/a / 99.7% / 95%
Long-term bank debt: zero (Nepali Times) / none / none (leases only)

If that is the picture, what is there to learn from it?

15. Five lessons

Borrow capability, not just capital. What CARE credits ITC with is leaf, research, packaging and management, not cash. A joint venture that transfers those is worth more than one that brings money.
Distribution is an asset that never shows on the balance sheet. About 150 direct customers feed more than 100,000 shops (company claim). Any Nepali consumer company that wants scale has to build this first. Capital is easier to find.
Diversifying out of a cash cow is harder than building the cow. The garment unit exported 85% of what it made and died in one labour season. Twenty years on, foods, incense and a hotel are still small next to cigarettes. Labour relations and security belong in the investment case.
A margin created by policy is borrowed from the policymaker. Taxes, bans and warning sizes drive Surya’s economics more than any factory decision does. The time to build a second engine is while the first one is paying.
Publish more. Nepal’s largest private manufacturer can be analysed mainly through a rating agency and its Indian parent’s filings. If a company is a country’s top taxpayer, the public can reasonably expect to see its accounts. (Our view.)

16. So, what did we learn?

It earns like a market leader with few rivals and pays out like a utility.
In FY19 the state took a bigger slice of each packet than the people who own the factory.
Control sits in Kolkata. The factories, the tax bill and the packets are in Nepal.
Its next chapter is whether anything other than cigarettes can ever matter to it.
The numbers we could check are thin. A company this central should publish more.

The product is what we see. The business is what we don’t. And the numbers reveal the difference.

When a company’s biggest partner is the tax collector, who decides how big it is allowed to be?

What other Nepalese company do you think deserves a KYC?

Sources & further reading

Checked 8 October 2026. Educational research, not investment advice.