ITC “rearchitecting” cigarette portfolio to tackle challenges arising from sharp increase in taxes

ITC, the country’s largest cigarette maker, is “rearchitecting” its cigarette portfolio and carrying out “a lot of innovations” to tackle challenges arising from a sharp increase in taxes on cigarettes and various tobacco products, its Chairman and Managing Director Sanjiv Puri said on Thursday.

Replying to shareholders’ queries during the diversified conglomerate’s 115th annual general meeting (AGM) on Thursday, Puri said, “ We will have some challenges for some time, but we are taking the appropriate steps to deal with the circumstances that have arisen on account of the increase in taxes.”

During the AGM, several shareholders raised concerns about a fall in ITC’s share prices after the government substantially increased taxes on cigarettes to around 70 per cent.

Allaying their concerns, Puri said, “We have experienced similar instances in the past. Also, on account of taxation, our share price has sometimes been impacted. But the task of the management is always to roll up our sleeves, put our heads down and create value. And the management has successfully done so in the past.”

He said to tackle the current challenges of a steep rise in taxation on cigarettes, the company has taken a calibrated approach of pricing to minimise the losses to illicit products. “At the same time, we are rearchitecting the portfolio, and you will see a lot of innovations in the market, new SKUs to enable rearchitecting of the portfolio. That’s how we are addressing it,” Puri said.

He said as far as the longer-term perspective is concerned, ITC’s continuous diversification move is aiming at creating growing value for the shareholders. And the diversification journey has been gathering momentum over time.

According to Puri, when the ITC Next Strategy was launched in 2017, the share of the non-cigarette businesses in the conglomerate’s bottom line was around 17-18 per cent. Prior to its hotel business demerger in 2025, the share of the non-cigarettes businesses in the bottom line rose up to 25 per cent.

“During that period, the bottom line of ITC moved from ₹10,000 crore to ₹20,000 crore, and the share of non-cigarette profits moved from about 18 per cent to 25 per cent. That shows how the other sectors have been progressing, and they’ve been progressing at a faster rate,” Puri said, adding that the company is making large investments in non-cigarette FMCG business, agri business and paperboards, paper & packaging business.

He said the non-cigarette FMCG business has emerged as a very big “growth lever” for the company. “We were about ₹10,000 crore in 2017. We are today at ₹24,000 crore (revenue in non-cigarette FMCG business). During this time, margins have also improved by about a per cent or so year-on-year,” Puri said.

On ITC’s wholly-owned subsidiary ITC Infotech, he said the conglomerate will take a decision on its listing on the bourses at an appropriate time. “Now, ITC Infotech is a separate company so there’s no question of demerger. It has been doing quite well,” he said, adding that ITC is continuously building up capabilities in ITC Infotech as it believes that the future will belong to IT companies with developed capabilities.