ITC to rearchitect cigarette portfolio, take calibrated pricing actions to tackle effects of tax hike: chairman Puri

ITC Ltd, India’s largest cigarette maker, said it is taking steps to contain the fallout of a tax hike in February that increased illicit trade in the tobacco product and sent the company’s share price tumbling.

“The approach we’re taking is calibrated pricing, at the same time raising (the issue) with industry bodies,” Sanjiv Puri, chairman and managing director of ITC, told shareholders, addressing their queries on the company’s share performance. “At the same time, we are rearchitecting the portfolio, and you will see a lot of innovations in the market, a lot of new SKUs in the market, to enable rearchitecting of the portfolio.”

Puri did not elaborate on the measures that ITC plans to take.

Additional excise duty and cess were slapped on cigarettes and tobacco products from 1 February. This was apart from goods and services tax at the highest slab of 40%, which replaced the 28% GST-plus-compensation cess structure. As a result, cigarette prices increased by ₹22-25 per pack of 10 sticks.

This has taken a toll on ITC shares. The company’s shares have declined over 22.7% on the National Stock Exchange so far in 2026. The Nifty FMCG index lost 8.7%.

“High and discriminatory taxes on cigarettes, while aimed at reducing consumption, have had unintended consequences of fuelling the growth of smuggled and domestically manufactured tax-evaded cigarettes, causing a shift to other lightly taxed/tax-evaded forms of tobacco products,” the company said in its report and accounts document for 2026.

ITC has said in earlier quarterly reports too that illicit cigarette trade increases when higher taxes are imposed on tobacco products.

The company’s cigarette business, which accounts for 45.88% of ITC’s turnover, reported revenue of ₹37,100 crore in FY26, up 13.7% from a year ago.

Analysts at Motilal Oswal Financial Services said in a report in June that ITC’s non-cigarette business continues to exhibit structural improvement. However, the outlook for the cigarette segment was cautious.

“We expect volatility in cigarette volumes and EBIT to moderate from the initial transitionary phase,” they said. “Given the MRP revisions are still underway, the outlook for ITC’s cigarette business remains uncertain. We do not rule out any possibility for further earnings cuts.”

Puri said the “prolonged uncertainty arising from the West Asia crisis has severely impacted the global economy, threatening energy security and trade. Indeed, the multitude of events in the recent past only reinforce the fact that global volatility is no more sporadic.”

ITC has a presence in the FMCG segment with packaged food business like Aashirvad atta and salt, Bingo chips and Sunfeast biscuits and personal care products under brands like Fiama, Vivel and Savlon. This segment reported revenue of ₹24,210 crore in FY26, up 10.1% from a year ago.

ITC reported consolidated revenue from operations of ₹89,913.33 crore in FY26, up 10.1% from the previous year. Profit after tax from continuing operations was ₹21,018.15 crore, up 4.89% from a year ago. ITC demerged its hotel business into a standalone entity, ITC Hotels Ltd, on 1 January 2025.

Puri added that the consumer landscape in India is evolving rapidly. The rise of aspirational Bharat, premiumization, Gen Z and Gen Alpha consumers, expanding digital access and the growth of quick commerce are reshaping categories, channels and expectations.

Neethi Lisa Rojan is a senior correspondent focusing on the consumer goods and retail sector working from Mumbai for Mint since 2026. She has been a journalist for a little over two years with Moneycontrol and The Morning Context. She has covered the consumer and healthcare sectors in earlier roles. She was a double gold medallist during her bachelor’s from Mahatma Gandhi University Kerala and post-graduation from Pondicherry University. With a background in commerce and journalism, she brings a sharp analytical lens to stories on India’s fast-evolving consumer goods and ...