ITC's Agri Business Eyes Value-Added Future Amidst Q2 Revenue Dip

ITC reported a 1.3% dip in revenue for the second quarter of FY26. This was primarily driven by a significant 31% revenue decline in its agri-business segment. The company cited timing differences in crop procurement and customer order cancellations for value-added agri exports, caused by tariff confusion, as the main reasons for this downturn.

Despite the recent performance, ITC's Managing Director and Chairman, Sanjiv Puri, expressed strong optimism about the agri portfolio's future direction. He highlighted a strategic pivot towards creating a value-added, attribute-specific, processed, and organic agri portfolio. The core idea is to move from generic agri products to proprietary ones, developing unique, branded offerings.

The agri division, historically supporting the food business within ITC's Rs 22,000 crore FMCG division, is now increasingly focused on processing value-added agricultural products. This includes biological extracts such as pharmaceutical-grade nicotine and progressing on medicinal aromatic plants, with investments in proprietary products underway.

ITC's R&D center in Bengaluru is working on differentiated products and proprietary agri solutions, following a farm-to-fork approach from seed to finished product. The strategy aligns with changing consumer demands for organic and sustainably sourced food and anticipates emerging regulatory needs, including compliance with EUDR (European Union Deforestation Regulation).

Digital tools like ITC Mars and Astra are being utilized to optimize logistics, provide data on weather and plantations, and improve cost efficiency. The company claims these initiatives also benefit farmers, with ITC Mars reportedly helping farmers achieve 23% higher returns. Climate-smart agriculture practices are being implemented to build resilience and increase farm incomes, with initial pilots showing high resilience and yield.

Impact This news indicates a strategic shift and significant investment by ITC in its agri-business, focusing on innovation and value addition. While short-term revenue may be affected, the long-term vision could lead to new revenue streams and improved profitability, positively impacting investor confidence and the company's stock performance. The focus on sustainability and farmer welfare also aligns with global trends and potential regulatory advantages. Impact Rating: 7/10

Difficult Terms Explained: GST: Goods and Services Tax, a uniform indirect tax levied on the supply of goods and services. Value-added: Products that have been processed or enhanced to increase their market value. Attribute-specific: Products characterized by particular qualities or features, such as high protein content or specific sourcing. Proprietary: Products that are owned and controlled by a specific company, often protected by patents or unique processes. Biological extracts: Compounds derived from living organisms. Farm to fork: A concept that traces the journey of food from its origin on the farm to the consumer's plate, emphasizing transparency and safety. EUDR: European Union Deforestation Regulation, a law aimed at ensuring that products sold in the EU are deforestation-free and produced legally. FPOs: Farmer Producer Organizations, farmer-owned companies that collectively engage in farming activities, procurement, and marketing. AI: Artificial Intelligence, technology that enables machines to perform tasks typically requiring human intelligence. Climate-smart agriculture: Farming practices that sustainably increase productivity and incomes, adapt and build resilience to climate change, and reduce greenhouse gas emissions. Resilience: The ability of a farm or agricultural system to withstand and recover from shocks and stresses, such as extreme weather events.