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ITC Ltd. faced a stark contrast in its March quarter results, with net profit falling sharply while revenue saw solid growth.
Revenue Growth Outpaces Profit Drop
Despite net profit declining 72.6% year-on-year to Rs 5,387 crore, ITC's operational revenue increased by 17% to Rs 23,821 crore. The crucial cigarette business revenue climbed 29% to Rs 11,951 crore, boosted by price increases following a February excise duty hike. The 'FMCG Others' segment also performed well, with revenue up 15% to Rs 6,352 crore. The total proposed dividend for FY26 is Rs 14.50 per share, including a Rs 8 final dividend and a Rs 6.50 interim dividend. ITC's stock saw a slight gain of 0.15% to Rs 308.00 on May 21, 2026.
Profitability Factors and Segment Performance
The significant drop in net profit was primarily due to an exceptional Rs 14,652 crore gain recorded in the same quarter last year. Underlying operational performance remained healthy, with profit before tax rising approximately 4.9% year-on-year to Rs 7,172 crore. The company's P/E ratio (TTM) was around 17.3 in May 2026, and its dividend yield of 4.66% is considered high compared to peers.
Challenges Ahead: Taxes, Costs, and Illicit Trade Risks
Concerns linger over the impact of higher cigarette excise duties implemented in February 2026, which may not be fully covered by price hikes, potentially affecting margins. Global factors, including Middle East conflict-related supply chain issues, have driven up raw material costs for items like edible oil and packaging. ITC has cautioned that increased cigarette taxes could fuel illegal trade, harming farmers, retailers, and small businesses. Investors are watching volume trends closely, as similar tax increases have previously caused stock price fluctuations.
Dividend and Analyst Views
ITC's board recommended a final dividend of Rs 8 per share, making the total FY26 dividend Rs 14.50 per share. Analysts generally hold a neutral view on ITC, with an average price target of Rs 359.19. This outlook balances the company's strong brands and fundamentals against the evolving regulatory and economic climate.