ITC’s Mixed Bag: Strong Core, New Bets, But Margin Clouds

stands tall as India’s largest cigarette company but has steadily grown into FMCG, agriculture, and paper & packaging. Even after diversifying, its real cash cow remains cigarettes—making up 44.4% of its FY25 revenue (₹734.6 billion) and about 75% of overall profits. The cigarette business rose 7.1% in revenue, with profit before interest and tax (PBIT) up 5% to ₹200 billion, delivered by higher sales volumes, share gains from curbing illegal trade, strong premium brand sales, and stable taxes. FMCG-Others (foods, personal care) grew 5% in the same year, led by flour, spices, dairy, and premium products. However, segment PBIT slipped 11% to ₹15.8 billion due to heavy inflation and increased marketing spends, kicking EBITDA margins down to 9.8%. This segment grappled with weak demand and tough rivalry from regional and private brands, as more customers chose cheaper, non-branded goods. Still, ITC’s premium portfolios did well. Digital, eB2B, and modern trade sales now form a third of FMCG revenues. More than 100 new launches and strategic acquisitions in organic food and baby care show ITC’s effort to future-proof growth. Agri business was a highlight: revenue soared 25% and PBIT 18%, thanks to strong tobacco, spices, and rice exports. The ITCMAARS tech platform now connects 2 million-plus farmers, adding future potential. Paper and packaging didn’t fare so well—1% revenue growth, 34% PBIT drop—hit by weak demand and high costs. Consolidated revenue rose 10% in FY25, but net profit grew just 1% due to cost and margin pressures. As ITC trades at its 10-year average P/E of 26x, the shares offer core stability and good dividends. Yet, shareholder gains depend on reviving FMCG and paper margins as reliance on core cigarettes faces future risks. Diversification could deliver, but execution holds the key.