ITC Q2 Results: Net Profit Falls 18.7% to ₹4,168 Crore on Cigarette Tax

ITC Ltd’s consolidated net profit fell 18.7% year-on-year to ₹4,168.40 crore in the July–September quarter, as steep taxes on cigarettes introduced in February continued to squeeze its largest business.

The ITC Q2 results, approved by the board on November 2, compare with a profit of ₹5,126.11 crore a year ago. Profit was also 5.1% lower than in the June quarter, according to Business Standard. The company’s media statement on the September quarter results sets out the full details.

Consolidated net revenue rose 3.9% to ₹20,269 crore, up 6% from ₹19,114 crore in the previous quarter. Both revenue and profit came in marginally ahead of the Bloomberg consensus of ₹20,111 crore and ₹4,136 crore respectively.

ITC Q2 results: cigarette tax drags, FMCG holds up

The cigarette segment, which earns the bulk of ITC’s profit, reported a 26% fall in pre-tax profit to ₹4,044.49 crore. On a sequential basis, however, the segment’s profit rose 7.3% from ₹3,769.11 crore in the June quarter.

From February 1, 2026, GST on cigarettes moved from 28% of transaction value to 40% of the retail sale price. Excise duty was also raised sharply after the compensation cess was phased out. This is the second straight quarter in which the higher levy has hurt ITC’s bottom line.

The company said legal industry volumes stayed under pressure because of an “unprecedented increase in tax”. It added that it had taken a calibrated approach, aiming to limit the risk of smokers shifting to illicit cigarettes.

The non-cigarette FMCG business offered relief. Segment revenue climbed 19.1% to ₹7,218.36 crore, while pre-tax profit rose 31.4% to ₹576.69 crore. ITC said revenue growth was at a 14-quarter high.

Biscuits, snacks, noodles, spices, salt, frozen snacks, homecare and notebooks each grew more than 20%. Dairy and personal wash grew in the high teens, and the company’s digital-first and organic brands now have an annual revenue run rate above ₹1,800 crore.

Paperboards rebound, agri business faces headwinds

The paperboards, paper and packaging segment posted the sharpest improvement. Revenue rose 35.9% to ₹3,017.45 crore and pre-tax profit jumped 50.7% to ₹273.32 crore, helped by better demand and price increases. ITC completed its acquisition of Century Pulp & Paper on August 1, 2026.

Agri business revenue grew 12.7% to ₹4,550.60 crore, with segment profit up 14.3% to ₹518.41 crore. The company said the conflict in West Asia and delayed call-offs from customers affected the business during the quarter.

On a standalone basis, ITC reported a profit of ₹4,137.12 crore for the quarter, according to its exchange filing. Standalone profit for the first half of FY27 stood at ₹7,715.94 crore.

Why it matters for investors and industry

ITC is one of the most widely held stocks on Dalal Street, and its cigarette business has long funded expansion into packaged foods, paper and agri exports. The latest ITC net profit numbers show how sensitive that model is to tax policy.

The diverging trends also point to a business in transition. Non-cigarette FMCG is growing at its fastest pace in more than three years, but it still contributes a fraction of the profit that cigarettes generate. Any further tax action would test how quickly the consumer goods arm can close that gap.

Competing FMCG companies are watching the same demand signals. Several peers, including Tata Consumer Products in its Q2 results, have also reported double-digit revenue growth this season.

ITC shares closed 0.3% higher at ₹266.40 on the NSE on November 2. The results were declared after market hours, so the stock’s reaction will play out in Tuesday’s trade.

What comes next

ITC said the Indian economy continued to show strength. However, it flagged deficient and uneven monsoons, lower reservoir levels and strengthening El Niño conditions as risks to farm output and inflation.

After the ITC Q2 results, investors will track whether cigarette volumes stabilise in the coming quarters and how much pricing power ITC retains without pushing consumers towards illegal products. The integration of Century Pulp & Paper and the pace of FMCG margin expansion will be the other markers to watch. For more corporate earnings coverage, visit our business news section.