Cigarette makers see volumes and profits fall in first full quarter after tax hike
ITC, Godfrey Phillips India and VST Industries reported weaker underlying cigarette revenue, volumes and profit in April-June after GST rose to 40% and new excise duties took effect on February 1. VST’s cigarette volumes declined 14%, while Godfrey Phillips’ net profit fell 44.3%.
What happened
ITC, Godfrey Phillips India and VST Industries reported lower underlying revenue, cigarette volumes and profits in the first full quarter after India raised
Key facts
- GST on cigarettes and tobacco raised to 40% in February
- Additional excise duty: Rs 2,100-8,500 per 1,000 sticks
- ITC cigarette gross revenue fell 31.45% to Rs 3,769.11 crore in April-June
- ITC cigarette reported revenue rose 73.72% to Rs 16,596.67 crore
- Godfrey Phillips net profit fell 44.3% to Rs 198.39 crore
- Godfrey Phillips net revenue excluding excise fell 18.8% to Rs 1,206 crore
- VST profit after tax fell 24.42% to Rs 42.42 crore
- VST net revenue fell 13.5% to Rs 256 crore
- VST cigarette volumes fell 14% to 611 million sticks per month
- ITC, Godfrey Phillips and VST hold about 90% of India's cigarette market
Why this matters
Broad-based post-tax demand pressure may make adjacent nicotine, FMCG diversification and route-to-market efficiency assets more strategically valuable for incumbent tobacco companies.
What to watch
- Monthly legal cigarette dispatch and volume trends, especially whether VST's 14% decline narrows in the next two quarters.
- Additional retail-price hikes and changes in pack sizes or low-unit-price offerings.
- Management commentary on downtrading, illicit trade, rural demand and inventory normalization.
- GST and excise collection data versus budget expectations.
- Enforcement actions, seizures and any government response to illicit-cigarette concerns.
- Margin movement at ITC, Godfrey Phillips India and VST Industries despite weaker volumes.
- Take further calibrated price increases while protecting entry-level and mid-price pack points.
- Increase promotions, distribution incentives and retailer engagement to defend shelf space and discourage downtrading.
- Accelerate premiumization, smaller-pack formats and non-cigarette FMCG diversification to offset cigarette weakness.
- Lobby for stronger anti-illicit-trade enforcement and for a more predictable tobacco-tax framework.
- Tighten costs, advertising spend and working-capital management if volume declines persist.