ITC Q2 Results: Net Profit Rises 2.6% to Rs 5,186 Crore Despite Revenue Dip - 5 Key Takeaways
ITC Ltd announced its financial results for the July-September quarter of fiscal year 2025-26 on Thursday, October 30, 2025. The diversified fast-moving consumer goods (FMCG) conglomerate reported a consolidated net profit increase of 2.6% to Rs 5,186 crore, demonstrating resilience despite operational headwinds and a marginal decline in revenue from core operations.
1. Revenue from Operations Declines Marginally
ITC's revenue from core operations witnessed a slight decline of more than 1% to Rs 21,255.86 crore in Q2 FY26, compared to Rs 21,536.38 crore recorded in the corresponding quarter of the previous fiscal year. This year-on-year decrease reflects the challenging operating environment characterized by external factors including weather disruptions and regulatory transitions.
Despite the revenue dip, ITC managed to deliver profit growth, demonstrating effective cost management and operational efficiency. The company's press statement highlighted that standalone gross revenues actually rose 7.1% during the quarter, driven primarily by robust performance in cigarettes and FMCG segments.
On a consolidated basis, ITC's operating performance received significant contributions from key subsidiaries, particularly ITC Infotech India and ITC Hotels, which helped offset pressures in other business segments.
2. Cigarette Sales Surge 6% Year-on-Year
The cigarette business, ITC's traditional cash cow, delivered strong performance during the quarter. Consolidated revenues from cigarette sales jumped 6% to Rs 9,414.34 crore, compared to Rs 8,877.86 crore in the same period last year.
This growth was achieved despite elevated leaf tobacco consumption costs. The company noted in its official statement that "leaf tobacco consumption cost remains elevated," though some moderation in procurement prices has been witnessed in the current crop cycle.
ITC attributed the cigarette segment's success to strong, sustained performance in differentiated and premium offerings. The company's strategy of focusing on higher-margin premium cigarette brands continues to pay dividends, helping maintain profitability even as raw material costs remain elevated.
3. EBITDA Margin Expands to 35.1%
One of the most impressive aspects of ITC's Q2 performance was the significant expansion in EBITDA margin. The company's EBITDA margin increased by 185 basis points to 35.1% in the July-September quarter, compared to the same period in the previous fiscal year.
This substantial margin improvement reflects ITC's success in optimizing operational efficiency and cost structures. The company highlighted that adjusted EBITDA witnessed a robust 16% year-on-year growth to Rs 429 crore, up from Rs 369 crore in Q2 FY25.
The margin expansion demonstrates management's ability to navigate inflationary pressures while maintaining pricing power and operational discipline across business segments.
4. Delisting from Calcutta Stock Exchange
In a corporate action announcement, ITC's board of directors approved the voluntary delisting of the company's shares from the Calcutta Stock Exchange (CSE). This decision was made pursuant to Regulations 5 and 6 of the SEBI (Delisting of Equity Shares) Regulations, 2021.
However, investors need not worry about liquidity or trading access. The company clarified that its ordinary shares will continue to remain listed on the National Stock Exchange (NSE) and BSE Limited, ensuring nationwide trading facilities remain available.
This delisting from CSE is likely a practical decision reflecting minimal trading volumes on that exchange, allowing the company to streamline compliance and administrative costs while maintaining presence on India's primary stock exchanges where the vast majority of trading occurs.
5. Growth Momentum Amid Operational Challenges
ITC acknowledged facing several operational headwinds during the quarter that created short-term business disruptions:
Weather-Related Challenges
Excessive rainfall in many parts of the country disrupted supply chains and impacted consumer demand patterns, particularly affecting rural markets where ITC has significant presence.
GST Regime Transition
The transition to a new GST regime posed operational challenges, requiring adjustments to pricing, distribution, and compliance systems across ITC's diverse business portfolio.
Segment-Specific Performance
Despite these challenges, several product categories delivered strong growth:
- Staples segment - Continued momentum in branded staples portfolio
- Dairy products - Growing consumer acceptance and market penetration
- Premium Personal Wash - Strong performance in premium personal care offerings
- Agarbattis (incense sticks) - Sustained growth in this traditional category
The company noted particularly strong performance in its premium portfolio and NewGen channels, reflecting ITC's successful strategy of premiumization and digital transformation in distribution.
Notebooks Business Under Pressure
ITC highlighted that its notebooks industry segment remains challenged due to low-priced paper imports and opportunistic competitive behavior by local and regional players. This segment continues to face margin pressures, though it represents a relatively small portion of ITC's overall revenue mix.
Diversified Business Model Strength
ITC's Q2 results underscore the strength of its diversified business model spanning cigarettes, FMCG products, hotels, information technology services, and agri-business. This diversification provides resilience when individual segments face challenges, while allowing the company to capitalize on growth opportunities across multiple consumer categories.
The hotel subsidiary's contribution was particularly noteworthy, benefiting from India's robust tourism recovery and growing corporate travel demand. Similarly, ITC Infotech's performance reflects the ongoing digital transformation initiatives across industries globally.
Strategic Outlook and Market Position
Despite the marginal revenue decline, ITC's ability to grow profits and significantly expand margins demonstrates the company's operational excellence and strategic execution. Key factors supporting ITC's outlook include:
- Premiumization strategy - Focus on higher-margin premium products across categories
- Distribution strength - Extensive reach across urban and rural markets
- Brand portfolio - Strong brands commanding consumer loyalty and pricing power
- Digital initiatives - Growing presence in e-commerce and NewGen channels
Investor Perspective
For investors, ITC's Q2 results present a mixed picture. The 2.6% profit growth and impressive 185 basis point EBITDA margin expansion are positive indicators of operational health. However, the revenue decline and ongoing challenges in certain segments warrant monitoring.
The cigarette business continues to be the profit engine, and its 6% revenue growth provides stability. The company's diversification efforts into FMCG, hotels, and IT services offer long-term growth opportunities as these businesses scale and mature.
ITC's ability to navigate operational challenges while maintaining profitability growth speaks to management quality and the resilience of its business model in varied market conditions.
Looking Ahead
As ITC enters the festive season quarter (Q3), which typically sees strong consumer demand across categories, the company appears positioned to leverage its diversified portfolio and strong distribution network. The moderation in tobacco procurement prices could provide some margin relief, while the resolution of GST transition issues should reduce operational friction.
The company's focus on premiumization, digital channels, and operational efficiency should continue supporting profitable growth even if revenue momentum remains moderate in the near term. For a conglomerate of ITC's size and complexity, delivering consistent profit growth amid challenging conditions demonstrates the enduring strength of its business franchise.
Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.
