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
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. Quick answers to key questions • 5 QUESTIONS 1 Why did ITC's profit decrease in Q1 FY27? ⌵ ITC's profit decreased by 15.6% in Q1 FY27 due to a steep tax increase on cigarettes and a decline in its agri business, which outweighed revenue growth. 2 How much did ITC's revenue grow in Q1 FY27?
⌵ ITC's consolidated revenue from operations grew by 27.6% year-on-year to ₹29,523.30 crore in Q1 FY27. 3 What challenges did ITC face during Q1 FY27? ⌵ ITC faced challenges from higher input costs, geopolitical disruptions, a weak monsoon, and rising retail inflation which strained its operating environment. 4 Should investors be concerned about ITC's cigarette business performance? ⌵ Yes, investors should be concerned as ITC's cigarette revenue fell 25% year-on-year due to higher taxes, which analysts predict will continue to impact performance. 5 What measures is ITC taking to address cost pressures? ⌵ ITC is implementing staggered price increases on cigarettes and focusing on cost management initiatives and product portfolio strengthening to absorb cost pressures. 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 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.
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