ITC Limited reported a 27% year-on-year decline in net profit for the first quarter, as record-high taxation on cigarettes weighed heavily on the company's core tobacco business and the ongoing West Asia crisis disrupted agri-business exports.

The steep drop in profitability marks one of the sharpest quarterly declines for the Kolkata-headquartered conglomerate, which is India's largest cigarette manufacturer by market share and a prominent Nifty 50 constituent. Cigarette taxation reached unprecedented levels during the quarter, compressing margins across ITC's flagship fast-moving consumer goods (FMCG) and tobacco division. The cigarette business has historically been ITC's largest profit contributor, generating the surplus capital that has funded the company's decades-long diversification into FMCG, hotels, paperboards, and agri-business, making any tax-driven compression in this segment particularly consequential for overall earnings.

The geopolitical instability in West Asia further compounded the company's challenges, negatively impacting ITC's agri-business export operations during the period.

Despite the headwinds in its core and agri-business segments, ITC's broader FMCG portfolio demonstrated resilience. The segment recorded both revenue and profit growth, helped by steady consumer demand across rural and urban markets. Consumption patterns remained largely stable even as inflationary pressures persisted across the broader economy. Indian FMCG companies more broadly have been monitoring a gradual rural demand recovery, and ITC's segment performance aligns with that wider industry trend.

ITC, listed on both the BSE and the National Stock Exchange of India, operates across multiple business verticals including FMCG, hotels, paperboards and packaging, and agri-business.

Source: Economic Times Markets