Newsletter
Let’s first address the tax in the room. ITC Q1 profit took a sharp hit after the government increased excise duty and other taxes on cigarettes. Other than that, FMCG portfolio continued to grow at a healthy pace and revenue hit a new high.
But because cigarettes remain its biggest profit generator, the higher tax burden overshadowed an otherwise steady operating performance.
The numbers:
- Net profit: ₹3,579 crore, down 27% YoY
- Revenue: ₹26,943 crore, up 28% YoY
- EBITDA: ₹4,514 crore, down 27.9% YoY
- Margin: 26.7% vs 31.7% last year
More than tax: ITC absorbed a large part of tax impact during the quarter while simultaneously restructuring its cigarette portfolio. The company got more than 30 product interventions, aimed at protecting market share and responding to the new tax regime.
However, higher costs for edible oil, fuel, soap noodles and packaging materials, driven partly by the ongoing West Asia conflict, also weighed on margins. The company said these cost pressures were partly offset through commodity hedging, inventory planning and pricing actions.
FMCG kept the balance: revenue from the FMCG business grew 12%, while excluding staples, growth accelerated to 16%.
Dairy, snacks, instant noodles and frozen foods all grew by more than 20%, while personal care products delivered mid-teen growth.
Notebook sales, which had remained under pressure over the past few quarters, also staged a meaningful recovery.
The beverage business received an additional boost from the unusually hot summer.
Another interesting trend is the rise of ITC's newer brands. Businesses such as Yogabar, 24 Mantra Organic, Prasuma, Meatigo and Mother Sparsh have now reached an annual recurring revenue of around ₹1,500 crore. This showed acquisitions and digital-first strategy are gradually becoming meaningful contributors.
The company also continued seeing healthy growth through quick commerce, e-commerce and modern trade, as more consumers shifted towards online grocery purchases.
The agri business remained under pressure.
Exports slowed because geopolitical disruptions delayed customer orders, particularly in West Asia. The Indian leaf tobacco business also witnessed lower domestic demand alongside weaker global offtake.
On the other hand, the value-added agri portfolio, including spices, fruits and vegetables, continued to perform well.
The paperboards, paper and packaging business delivered a relatively better quarter. Revenue rose 9%, supported by better pricing, higher volumes and moderating wood costs. Continued investments in plantation development and supply-chain efficiency also helped improve profitability.
