ITC Q2 Profit Drops 18.5% on Cigarette Tax Pressure

ITC Limited (NSE: ITC) reported Q2 FY27 consolidated net profit of ₹4,229 crore, down 18.5% YoY. Consolidated revenue from operations increased 43.9% to ₹30,578 crore. However, revenue growth was significantly influenced by higher excise duties, making underlying business growth an important metric to track. Key Highlights • Consolidated net profit declined from ₹5,187 crore to ₹4,229 crore. • Consolidated revenue from operations increased 43.9% to ₹30,578 crore. • Net revenue after adjusting for excise duty grew approximately 5% to ₹20,454 crore. • Consolidated EBITDA declined 15.7% to ₹5,645 crore. • Cigarette segment profit declined approximately 26% YoY. • Other FMCG segment profit increased 31.4% to ₹577 crore. • Paperboards segment profit grew 50.7% to ₹273 crore. My View ITC's results highlight the pressure that higher cigarette taxation can create for a diversified consumer business. The biggest concern is the cigarette segment, which remains a major earnings contributor. Higher taxes have triggered price increases, putting pressure on legal cigarette volumes and profitability. However, the non-cigarette businesses are showing encouraging momentum. The 31.4% growth in other FMCG segment profit and 50.7% growth in paperboards segment profit indicate that ITC's diversification strategy is gaining traction. I believe the key question is whether these businesses can gradually offset the earnings pressure from cigarettes. What I'm Watching Next I will monitor cigarette volume recovery, FMCG segment margins and the performance of the paperboards and agri businesses. Management's ability to protect cigarette profitability while scaling its non-cigarette portfolio will be crucial over the next few quarters. Stance: Cautious in the near term due to cigarette taxation and declining profitability, but positive on the long-term diversification opportunity. Disclosure: I do not have any holding or position in the stock mentioned above.