ITC profit slips as cigarette tax hike, agri slowdown weigh on Q1

ITC Ltd's June-quarter (Q1FY27) profit fell as a steep tax increase on cigarettes and a slump in its agri business outweighed robust revenue growth, highlighting the pressure on one of India's largest consumer companies from higher input costs and geopolitical disruptions.

The Kolkata-based cigarettes-to-atta conglomerate reported a 27.6% year-on-year rise in consolidated revenue from operations to ₹29,523.30 crore, while net profit fell 15.6% to ₹4,508.79 crore, according to an exchange filing on Friday. Reported net profit included a one-time gain of ₹405.88 crore from the revaluation of ITC's existing stake in Sproutlife Foods Pvt. Ltd, which sells Yoga Bar.

Consolidated net profit before exceptional items (after tax) declined 23.2% to ₹4,103 crore. Consolidated Ebitda (earnings before interest, taxes, depreciation, and amortization) fell 24% year-on-year.

Revenue growth was driven by a 12% increase in the FMCG-Others business. But net revenue from the cigarettes business fell 25% year-on-year, while agri business revenue declined 16.55% to ₹8,082.06 crore.

Shares of ITC closed 1.42% lower at ₹281 on the National Stock Exchange on Friday, while the benchmark Nifty50 gained 0.27%.

Costs mount

ITC said the conflict in West Asia raised crude and crude-linked input costs while disrupting trade and supply chains, making the operating environment more challenging during the quarter.

The company also flagged a weak monsoon and rising input costs as key risks going forward.

“While consumption demand, both in rural and urban markets, remained resilient during the quarter, imported inflation is a key watch-out in the near-term,” ITC said in a press statement. “India is currently experiencing a significant deficit in monsoon and lower Kharif sowing levels compared to the same period last year.”

The broader macroeconomic backdrop also remained challenging. Driven by higher food prices, retail inflation accelerated to 4.38% in June from 3.93% in May, breaching the Reserve Bank of India's 4% medium-term target for the first time since January 2025.

Betting on brands

ITC said it is implementing staggered price increases to absorb the sharp hike in cigarette taxes while seeking to retain consumers. The company has undertaken 30 interventions to strengthen and reshape its product portfolio.

Within FMCG, dairy, snacks, noodles and frozen snacks grew more than 20% year-on-year, while personal care products posted mid-teens growth. ITC, which owns brands such as Aashirvaad, Sunfeast, Bingo, Vivel and Prasuma, said the FMCG business expanded Ebitda margin by 55 basis points year-on-year (excluding Sresta) despite sharp increases in fuel, edible oil, soap noodles and packaging costs linked to the West Asia conflict.

The company said it remains focused on cost management initiatives and price-volume rebalancing.

Its digital-first and organic portfolio, including Yoga Bar, 24 Mantra, Prasuma, Meatigo and Mother Sparsh, continued its growth trajectory, reaching an annual run rate (ARR) of about ₹1,500 crore. The fresh foods business reported gross merchandise value growth of over 90% year-on-year and an ARR of ₹300 crore.

Rivals such as Hindustan Unilever and Dabur have already raised prices across personal and home care products.

ITC's agri business continued to face pressure during the quarter as the West Asia conflict disrupted exports. Trade disruptions led customers to defer order offtake, weighing on segment performance, the company said.

Analysts at Nomura had warned in a 25 June report that they expected “cigarette volume to decline by 8% due to sharp price hikes of 25%.”