ITC is expected to report a muted March quarter performance with the cigarette business growth likely to remain under pressure following recent tax hikes, even as its FMCG segment continues to deliver healthy momentum. Brokerages broadly expect flat to marginal revenue growth for the quarter as weakness in cigarettes and agri business offsets stronger performance in packaged foods and other FMCG categories.
According to Citi, ITC's cigarette business revenue is likely to decline around 2% year-on-year (YoY) in Q4 FY26, while cigarette volumes are expected to remain largely flat. The brokerage said the business was impacted by higher taxation during the quarter.
Citi expects cigarette EBIT to decline around 5% year-on-year, with margins likely to contract by nearly 70 basis points to 56.9% due to rising leaf tobacco costs and inadequate price hikes during the quarter.
The company had faced disruption after the government increased taxes on cigarettes in February 2026.
Brokerages noted that the tax increase led to stocking activity in January, followed by partial price pass-through during February and March, resulting in temporary pricing pressure.
Nuvama said cigarette net revenue and EBIT are likely to decline around 3% and 7%, respectively, during the quarter. The brokerage expects ITC to implement further staggered price hikes over the coming months to fully offset the tax impact.
"While ITC has taken sharp price hikes across key brands, full pass-through is yet to be realised," Nuvama said in its preview note.
The brokerage added that cigarette volumes are expected to remain flat compared with 7% growth seen in the December quarter and 5% growth in the corresponding quarter last year. Despite pressure in the cigarettes segment, ITC’s FMCG business is expected to remain a key earnings support.
Citi expects the FMCG segment to report around 11% revenue growth during the quarter, while EBIT may jump 37% with margin expansion of around 140 basis points. Nuvama also expects FMCG revenue growth of around 10% YoY, driven by improving margins and favourable base effects.
The segment has increasingly become a larger contributor to ITC’s growth profile as the company expands its packaged foods, personal care, dairy and household products portfolio.
YES Securities expects ITC’s non-cigarette FMCG business to grow around 11% year-on-year during the quarter. The brokerage expects overall company revenue growth of around 1.6%.
The agri business is expected to remain weak due to shipment disruptions linked to tensions in the Middle East and softer trading activity. Nuvama see agri revenue to decline around 10% YoY, while Citi expects a 12% growth in the segment.
However, Nuvama said agri profits may still rise sharply because of margin recovery. The paper, paperboards and packaging business is also expected to witness modest growth amid continued import pressure.
Brokerages estimate paper segment revenue growth in the low single digits, while profitability may remain subdued because of competitive pricing and limited operating leverage.
At the consolidated level, Nuvama expects ITC’s EBITDA to decline around 3.5% YoY, while EBITDA margin may contract around 76 basis points to nearly 34%. YES Securities is also pencilling in EBITDA margin compression of around 72 basis points to 34%.
Gross margins are likely to remain broadly stable around 54-54.5%, according to brokerage estimates. While operational performance is expected to remain subdued, analysts said investors will closely monitor management commentary on cigarette demand trends, pricing actions, FMCG margin trajectory and rural consumption recovery.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
