ITC Q2: Higher cigarette taxes hit profitability, consolidated PAT falls 18.7%

ITC Ltd on Monday reported an 18.7% year-on-year decline in consolidated profit attributable to owners of the parent to ₹4,168.40 crore for the second quarter of FY27, compared with ₹5,126.11 crore in the corresponding quarter last year.

Consolidated EBITDA declined 15.7% to ₹5,644.83 crore from ₹6,694.69 crore a year ago. EBITDA margin contracted to 27.9% from 34.3%.

Revenue from operations rose 43.9% to ₹30,578.40 crore from ₹21,255.86 crore in the year-ago period. However, the sharp increase was largely influenced by higher excise duty on cigarettes. Excluding excise duty, revenue stood at ₹20,268.63 crore, up 3.9% from ₹19,501.63 crore.

Cigarette business faces pressure from higher taxes

ITC said the cigarette business continued to face pressure from the unprecedented increase in taxes, with legal industry volumes remaining under strain.

The company said it was implementing a “strategic and calibrated response” to navigate the tax increase, while seeking to balance the interests of stakeholders and mitigate the risk of consumers shifting disproportionately to illicit trade.

It added that enforcement agencies had reported a sharp increase in seizures of smuggled cigarette consignments across the country, pointing to the widening tax arbitrage opportunity in the market.

FMCG, paper businesses show growth momentum

The non-cigarette FMCG business continued to report growth, with revenue increasing across categories. Biscuits, snacks, noodles, spices, salt, frozen snacks, homecare and notebooks recorded growth of more than 20%, while dairy and personal wash delivered high-teen growth.

The paperboards, paper and packaging segment also showed signs of recovery, with revenue rising 36% year-on-year and segment profit before interest and tax increasing 48%. The company completed the acquisition of Century Pulp and Paper on August 1, 2026.

The agri-business segment reported 12% revenue growth, led by value-added products and leaf tobacco exports. However, exports remained affected by disruptions linked to the West Asia conflict, including delayed customer call-offs, constrained shipping availability and higher freight costs.

ITC said the operating environment remained uncertain amid geopolitical tensions, elevated crude oil and input prices, supply chain disruptions and higher freight costs. It also flagged uneven monsoon conditions and strengthening El Niño conditions as risks to agricultural output and inflation.