ITC to rearchitect cigarette portfolio, take calibrated pricing actions to tackle effects of tax hike: chairman Puri

Published 23 July 2026 · finance

ITC Ltd, India’s largest cigarette maker, said it is taking steps to contain the fallout of a tax hike in February that increased illicit trade

ITC Ltd, India’s largest cigarette maker, said it is taking steps to contain the fallout of a tax hike in February that increased illicit trade in the tobacco product and sent the company’s share price tumbling. “The approach we’re taking is calibrated pricing, at the same time raising (the issue) with industry bodies,” Sanjiv Puri, chairman and managing director of ITC, told shareholders, addressing their queries on the company’s share performance. “At the same time, we are rearchitecting the portfolio, and you will see a lot of innovations in the market, a lot of new SKUs in the market, to enable rearchitecting of the portfolio.” Puri did not elaborate on the measures that ITC plans to take. Also Read | Nestlé India posts strong Q1, flags commodity cost risks Additional excise duty and cess were slapped on cigarettes and tobacco products from 1 February.

This was apart from goods and services tax at the highest slab of 40%, which replaced the 28% GST-plus-compensation cess structure. As a result, cigarette prices increased by ₹22-25 per pack of 10 sticks. This has taken a toll on ITC shares. The company’s shares have declined over 22.7% on the Stock Exchange so far in 2026. The Nifty FMCG index lost 8.7%. “High and discriminatory taxes on cigarettes, while aimed at reducing consumption, have had unintended consequences of fuelling the growth of smuggled and domestically manufactured ta evaded cigarettes, causing a shift to other lightly taxed/ta evaded forms of tobacco products,” the company said in its report and accounts document for 2026. ITC has said in earlier quarterly reports too that illicit cigarette trade increases when higher taxes are imposed on tobacco products.

Also Read | iD Fresh targets FMCG-level margins before 2027 IPO The company’s cigarette business, which accounts for 45.88% of ITC’s turnover, reported revenue of ₹37,100 crore in FY26, up 13.7% from a year ago. Analysts at Motilal Oswal Financial Services said in a report in June that ITC’s non-cigarette business continues to exhibit structural improvement. However, the outlook for the cigarette segment was cautious. “We expect volatility in cigarette volumes and EBIT to moderate from the initial transitionary phase,” they said. “Given the MRP revisions are still underway, the outlook for ITC’s cigarette business remains uncertain. We do not rule out any possibility for further earnings cuts.” Uncertain geopolitical conditions Puri said the “prolonged uncertainty arising from the West Asia crisis has severely impacted the global economy, threatening energy security and trade.