ITC’s cigarette sales slump 22% as tax-led pricing hits volumes; FMCG grows 15%
ITC shares rose nearly 3% after Nomura upgraded the stock to Buy, calling its cigarette pricing calibrated. Q1 FY27 cigarette revenue fell 22% year-on-year and volumes declined in high single digits, while FMCG sales grew 15%. Motilal Oswal remains Neutral, flagging continued tax-driven earnings volatility.
What happened
ITC’s Q1 FY27 cigarette revenue fell 22% as tax-led price increases hurt volumes, while FMCG sales rose 15%. Nomura upgraded the company to Buy, citing
Key facts
- ITC shares rose nearly 3% in early trade
- Consolidated net cigarette revenue declined 22% YoY
- FMCG sales grew 15% YoY
- Cigarette volumes declined by high single digits; Nomura cited a 5% decline
- ITC launched more than 30 SKUs during the quarter
- ITC share price has declined nearly 23% in 2026
- Market capitalisation: about Rs 3.52 lakh crore
- P/E ratio: 17.02
- 52-week high: Rs 427; low: Rs 275
- Motilal Oswal target price: Rs 300, about 7% upside
- Nomura target price: Rs 340, about 21% upside
Why this matters
ITC’s accelerating FMCG portfolio expansion makes targeted brand, distribution, and category partnerships more strategically relevant as it reduces reliance on its volatile cigarette business.
What to watch
- Sequential cigarette volume trend in Q2 and Q3 FY27, particularly whether the high-single-digit decline moderates.
- Any additional central or state tax, GST, cess or regulatory action affecting tobacco pricing.
- Management commentary on illicit-cigarette trade, downtrading, rural demand and consumer response to revised price points.
- FMCG growth quality: volume growth versus price growth, new-SKU repeat rates, distribution additions and segment EBIT margin.
- Advertising and promotion spending as a percentage of FMCG sales, indicating whether growth is becoming more expensive to sustain.
- Competitive pricing actions from cigarette peers and local tobacco players.
- Broker estimate revisions for FY27-FY28 cigarette EBIT, FMCG margins and consolidated EPS.
- Use selective pack-price architecture, including smaller or value-oriented formats, to contain cigarette downtrading without broadly reversing pricing.
- Prioritize FMCG distribution expansion behind the strongest 30-plus new SKUs, especially high-repeat categories where scale can improve fixed-cost absorption.
- Increase targeted brand and trade investment in FMCG, using cigarette cash flows selectively rather than pursuing margin expansion at the expense of household penetration.
- Provide clearer disclosure on cigarette volume trends, tax impact, and illicit-trade indicators to reduce investor uncertainty around earnings durability.
- Accelerate premiumization and margin mix in non-cigarette businesses such as foods, personal care, hotels and agri to lower the consolidated dependence on cigarette pricing.