ITC to rearchitect cigarette portfolio, take calibrated pricing actions to tackle effects of tax hike: chairman Puri
ITC Ltd, India’s largest cigarette maker, said it was taking steps to contain the effects of a tax hike in February that increased illicit trade in the tobacco product and depressed the company’s share prices.
“The approach we have taken is calibrated pricing and also to raise (the issue) with industry bodies,” Sanjiv Puri, chairman and managing director of ITC, told shareholders while replying to their queries on the company’s stock performance. “We’re also redesigning the portfolio, and you’ll see a lot of innovation in the market, a lot of new SKUs in the market to drive the redesign of the portfolio.”
Puri did not provide detailed information about the measures ITC plans to take.
As of February 1, additional SCT and exemption have been introduced for cigarettes and tobacco products. This was separate from the 40% goods and services tax, the highest bracket, which replaced the 28% GST plus compensation structure. As a result, cigarette prices increased ₹22-25 pieces in a package of 10 sticks.
This hurt ITC shares. The company’s shares are down more than 22.7% on the National Stock Exchange so far in 2026. Nifty FMCG index lost 8.7%.
“Although the high and discriminatory taxes imposed on cigarettes aimed to reduce consumption, they led to unintended consequences such as fueling the growth of smuggled and domestically produced tax evasive cigarettes, causing a switch to other lightly taxed/tax evasive tobacco products,” the company said in its 2026 report and accounting document. he said.
ITC had also stated in its previous quarterly reports that the illegal cigarette trade increased when higher taxes were imposed on tobacco products.
The company’s cigarette business, which accounts for 45.88% of ITC’s turnover, reported revenue as follows: ₹37,100 crore in FY26, up 13.7% from a year ago.
Analysts at Motilal Oswal Financial Services said in a June report that ITC’s non-cigarette business continues to demonstrate structural improvement. However, the outlook for the cigarette segment is cautious.
“We expect volatility in cigarette volumes and EBIT to moderate from the initial transition phase,” they said. “Given that MRP revisions are still ongoing, the outlook for ITC’s cigarette business remains uncertain. We do not rule out the possibility of further earnings cuts.”
Uncertain geopolitical conditions
“Prolonged uncertainty arising from the West Asian crisis has seriously affected the global economy, threatening energy security and trade. In fact, numerous events in the recent past reinforce the fact that global volatility is no longer sporadic,” Puri said.
ITC has a presence in the FMCG segment with its packaged food businesses such as Aashirvad atta and salt, Bingo chips and Sunfeast biscuits, and personal care products under brands such as Fiama, Vivel and Savlon. This segment reported revenue of: ₹24,210 crore in FY26, up 10.1% from a year ago.
ITC reported consolidated revenue from operations ₹89,913.33 crore in FY26, an increase of 10.1% over the previous year. After-tax profit from continuing operations ₹21,018.15 crore, up 4.89% from a year ago. ITC spun off its hotel business into an independent entity, ITC Hotels Ltd, on 1 January 2025.
Puri added that the consumer landscape in India is evolving rapidly. The rise of Aspirational Bharat, premiumisation, Gen Z and Alpha Consumers, proliferation of digital access and growth of gig commerce; It is reshaping categories, channels and expectations.
