High taxes on cigarettes hits ITC Q1, net slips 27% to ₹3,579 crore
ITC Ltd. reported a 27% decline in standalone net profit for Q1 FY27, largely attributed to increased excise duties on cigarettes and rising operational costs. Despite the profit dip, the company saw a 28% growth in revenue and warned of potential economic headwinds from geopolitical conflicts and climate-related monsoon disruptions.
Why it matters
The performance of major FMCG conglomerates serves as a bellwether for consumer demand and the impact of government tax policies on corporate profitability.
FMCG major ITC Ltd., for the first quarter ended June 30, 2026, reported a 27% YoY fall in standalone net profit to ₹3,579 crore on higher taxes on cigarettes and increased operational expenses during the quarter.
The sharp decline on profit came on the government’s decision to increase excise duty and other taxes on cigarettes. Since this business contributes a major share of the company’s profit, the higher levies weighed on the margins.
Although the company increased prices of cigarettes, the move could not fully offset the impact. Also the company witnesses a significant migration of volume to illicit trade due to the high taxes.
Besides, expenses during the quarter increased substantially on higher input costs.
However, the company’s standalone revenue from operations increased by 28% YoY to ₹26,943 crore reflecting healthy growth across its businesses which includes FMCG, agriculture, paperboards and packaging.
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