FMCG major ITC said on Thursday that it reported a 4.2% increase in net profit to ₹5,187 crore, amid strong demand for its cigarettes and its ITC Infotech and ITC Hotels subsidiaries. However, its gross revenue declined 1.6% year-over-year to ₹21,047 crore.

The cigarette segment recorded 6.7% year-on-year growth to ₹8273 crore, driven by sustained strong growth in differentiated and premium offerings. The volume-led growth was driven by strategic portfolio and market interventions focused on competitive belts and on counteracting illicit trade. ITC also said it has continued its focus on strengthening its last-mile execution capability. However, ITC said that the cost of leaf tobacco consumption remains elevated, with a moderation in procurement prices witnessed in the current crop cycle.

“As seen in the past, stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enables volume recovery for the legal cigarette industry from illicit trade, leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector,” the FMCG major said in a statement.

In the FMCG segment, ITC said that excessive rains in many parts of the country and the transition to the new GST regime posed operational challenges, causing short-term business disruptions. Staples, dairy, premium personal wash and agarbattis drive growth, whereas strong performance continues in the premium portfolio and NewGen channels. However, the notebook industry remains impacted by low-priced paper imports and opportunistic play by local and regional players. ITC said that GST rates were reduced on over 50% of its FMCG portfolio, with the benefit passed on to customers.

According to ITC, high-frequency indicators for the quarter suggest mixed trends. “While rural demand continued to demonstrate resilience, urban consumption witnessed an uptick. On the other hand, industrial growth, core sector growth, automobile sales, credit growth and electricity and fuel consumption remained relatively subdued,” it said.

ITC Infotech recorded a revenue of ₹2,350 crore in the first half of FY26, an 18% increase from the year-ago period. The adjusted Ebidta in the same period has increased 16% to ₹429 crore. ITC says ITC Infotech’s Ebitda margin is at the upper end of mid-tier ITC companies.

ITC says that lower inflation, reduced interest rates, liquidity support from the RBI, income tax cuts announced in the recent Union Budget—along with front-loading of Government expenditure and the recent reduction in GST rates across a wide range of products—are expected to bolster consumption progressively. “Excessive rains in many parts of the country and the transition to new GST rates posed operational challenges, especially for the FMCG categories, causing short-term business disruptions during the quarter.”

ITC shares closed 0.53% lower on Thursday at ₹419.35 apiece.