ITC Q1 Profit Falls 27% as Record Cigarette Taxes Offset FMCG Growth
ITC's first-quarter net profit dropped sharply due to higher excise duties and weaker agri-exports, highlighting the vulnerability of India's largest tobacco player to regulatory shifts and global trade disruptions despite resilient FMCG growth.
ITC reported a 27 percent drop in first-quarter net profit to ₹3,578.82 crore for the quarter ended in June. The decline comes as record cigarette taxes and trade disruptions from the West Asia crisis weighed heavily on the Kolkata-based conglomerate.
Despite the profit slump, revenue from operations rose 28 percent year-on-year to ₹26,943.23 crore. However, net revenue fell 14 percent. The company noted that gross revenue figures are not directly comparable to the previous year because accounting standards now exclude GST and the GST compensation cess, while excise duty remains included following a sharp increase in February.
Investors reacted negatively to the underlying volume trends. ITC shares closed 1.5 percent lower at ₹280.95 on the Bombay Stock Exchange, underperforming the benchmark Sensex, which gained 0.2 percent. Analysts estimate that cigarette sales volumes contracted by 6 to 7 percent over the same period last year.
Holding more than a 75 percent share of India’s legal cigarette market, ITC stated it deployed approximately 30 interventions to manage the "unprecedented increase in tax" burden. These measures included staggered price increases designed to prevent consumers from migrating to the illicit trade, alongside a restructuring of its product portfolio.
The fast-moving consumer goods division provided a critical buffer against the tobacco headwinds. FMCG segment revenue grew 12 percent to ₹6,482 crore, while profit before interest and tax climbed 21 percent to ₹478 crore. Categories such as dairy, snacks, noodles, and frozen snacks expanded by more than 20 percent.
Conversely, the agri-business segment struggled, with revenue declining over 16 percent to ₹8,082 crore. Exports were hampered by trade disruptions linked to the West Asia conflict, and segment profit before interest and tax fell 18 percent. The leaf tobacco division also faced softer domestic demand, though the paperboards and paper segment managed a 9 percent revenue increase and a 38 percent rise in profitability.
Looking ahead, management flagged imported inflation as a near-term risk to consumption, which has otherwise remained resilient across rural and urban markets. The company warned that a significant monsoon deficit, lower kharif sowing levels, and the protracted West Asia conflict could collectively weigh on India’s growth, inflation, and current account.
