ITC results: Q2 profit falls about 19% as cigarette tax bites

ITC, the company best known for cigarettes but also a major maker of packaged foods, personal care products and paperboard, reported on Monday, 2 November 2026, that its consolidated net profit for the July to September quarter fell 18.7% from a year earlier to about Rs 4,168 crore. Consolidated revenue rose 3.9% to about Rs 20,269 crore. On a standalone basis, which leaves out subsidiaries, profit fell about 20% to Rs 4,137 crore. The main cause was the cigarette business, where earnings fell by more than a quarter after a sharp rise in taxes on cigarettes that took effect on 1 February 2026. The company's other businesses grew, and both revenue and profit came in slightly above analysts' consensus estimates.

ITC is a large listed company widely followed by investors. Its cigarette business has been its profit engine, earning far more per rupee of sales than its food, soap or paper businesses. That is why a tax change on cigarettes can move the whole company's results.

The change this year was large. Earlier, GST on cigarettes was charged at 28% on the price at which the company sold the product. From February it is charged at 40% on the retail price paid by the consumer, a higher rate on a bigger base. The company has said the legal cigarette industry's volumes remain under pressure because of what it called an unprecedented increase in tax. When legal cigarettes become much more expensive, sales volumes tend to fall.

The other side of the results is ITC's long effort to diversify. Its packaged foods and personal care businesses grew revenue by about 19%. Its agri business, which buys and trades farm produce, grew about 13%. The paper and packaging business grew fastest, at about 36%. These businesses are smaller and earn thinner margins, so they cannot yet make up for the fall in cigarette profits, but their growth shows the company is less dependent on tobacco than it once was.

For the government, the results show the trade-off in tobacco taxation: higher taxes are a public-health tool and a source of revenue, but they also shrink the legal market that pays them.

Peepals calculation: If consolidated profit fell 18.7% to about Rs 4,168 crore, the same quarter last year earned about Rs 5,127 crore (4,168 ÷ 0.813 ≈ 5,127), in line with the Rs 5,126 crore it reported then. Non-cigarette FMCG revenue of about Rs 7,218 crore is about 36% of consolidated revenue of Rs 20,269 crore (7,218 ÷ 20,269 ≈ 0.36). Paperboard revenue grew from about Rs 2,220 crore to Rs 3,016 crore on BW's standalone figures, an increase of about Rs 796 crore. Our calculation from the reported figures.

Short-term: ITC's profit will stay under pressure while cigarette volumes adjust to the new tax. Shareholders will watch whether its other businesses keep growing at double-digit rates.

Long-term: The results add to the case for ITC to keep building its food, personal care and paper businesses so that a single tax decision on tobacco moves its earnings less.

Who is affected: ITC's shareholders, including many retail investors and mutual funds; tobacco farmers and suppliers; shopkeepers who sell cigarettes; and the government, whose tax revenue depends on legal cigarette sales.

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