- ITC's cigarette profit fell 27.2% YoY to Rs 3,813 crore in Q2 due to tax hikes
- Net cigarette revenue declined 21%, impacted by higher taxes and illicit competition
- Company launched new variants and international brands to protect market share
ITC Ltd.'s cigarette business remained the biggest drag on its earnings in the September quarter, as a sharp increase in cigarette taxes continued to hurt legal industry volumes and put pressure on profitability. The company is now relying on new product variants and internationally positioned brands to protect its market share and counter competition from illicit and smuggled cigarettes.
Profit from the cigarette business fell 27.2% year-on-year to Rs 3,813 crore in the second quarter, compared with Rs 5,241 crore in the corresponding period last year. Net cigarette revenue declined 21%. ITC attributed the weakness to an unprecedented increase in cigarette taxes, which has widened the price gap between legal products and illicit alternatives, increasing the risk of consumers shifting towards smuggled cigarettes.
-
Indian Markets Turning Corner After Two Tough Years, Says Sandeep Tandon -
NDTV Profit Ignite 2026: Experts See Opportunity In Equities, Stay Bullish For Long-Term -
Buy Right, Sit Tight Does Not Work for Individual Stocks, Says Dinshaw Irani -
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI
The company said it had implemented a series of strategic interventions to rework its product portfolio, reinforce its market position and protect its consumer franchise. These include introducing new variants and developing its own trademarks with international appeal to take on global smuggled brands.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
ITC also reported an improvement in the cigarette business's performance compared with the preceding quarter, indicating some recovery from the pressure seen earlier.
READ | ITC Q2 Results: Biscuits, Noodles And Salt Outpaced Cigarettes This Quarter By A Wide Margin
ITC flagged a sharp increase in seizures of smuggled cigarette consignments by enforcement agencies across the country. According to the company, this points to growing exploitation of the widening tax arbitrage opportunity in the Indian market by unscrupulous players and anti-social elements. The company said its response was calibrated to limit a disproportionate shift in volumes towards illicit trade while balancing the interests of consumers and other stakeholders.
Interestingly, gross revenue from cigarettes surged 78.1% to Rs 15,536 crore. However, the increase reflects the impact of higher taxes included in gross sales and does not indicate an improvement in underlying cigarette demand.
Tobacco Farmers And Exports Face Pressure
The company also highlighted the impact of weaker domestic cigarette demand on the broader leaf tobacco business. The Tobacco Board's announcement of a significant reduction in the Flue-Cured Virginia (FCV) tobacco crop size is likely to affect Indian tobacco farmers' earnings and livelihoods, ITC said. The company said it was leveraging its customer relationships, crop development and processing expertise, and sustainability credentials to develop new businesses and strengthen its competitive position.
Meanwhile, exports of agricultural commodities continued to face disruption due to the conflict in West Asia. Delayed customer call-offs, limited availability of shipping lines and a sharp rise in ocean freight costs affected export operations. ITC said it was stepping up market-development initiatives in new geographies to mitigate the impact.
Its nicotine and nicotine-derivative products business, set up through wholly owned subsidiary ITC IndiVision Ltd., continued to scale up. The business has turned profit before interest and tax (PBIT) positive over the last three quarters.
ITC Q2 Result Highlights
The pressure on cigarettes weighed on ITC's overall performance during the quarter. Consolidated net profit declined 20.1% year-on-year to Rs 4,137 crore, compared with Rs 5,176 crore a year earlier. The figure was marginally above the estimate of Rs 4,129 crore. Revenue increased 1.8% to Rs 18,401 crore from Rs 18,081 crore, beating the estimate of Rs 17,520 crore.
READ | ITC Q2 Results: Profit Plunges 20% As Margin Shrinks, Revenue Up Slightly
Ebitda fell 17.5% to Rs 5,160 crore from Rs 6,251 crore. The Ebitda margin contracted 660 basis points to 28% from 34.6%, compared with an estimate of 28.7%.
ITC Share Price Today
The results were announced after market close. Shares of ITC closed as much as 0.3% higher during the day at Rs 266.4 apiece on the NSE. This compares with a 1.68% advance in the benchmark Nifty 50. The shares have risen 2.26% in one week and 4.1% in one month. The shares are down 26.78% year-to-date and 36.62% in one year.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
