Business

IIE DIGITAL DESK | August 3, 2026: Shares of ITC, India's largest cigarette manufacturer and one of the country's leading diversified companies, witnessed strong buying interest on Monday, August 3, despite the company reporting a decline in its first-quarter profit. The stock gained sharply after several global brokerage firms released positive assessments of ITC's Q1 performance, particularly highlighting better-than-expected cigarette volume trends and improved business resilience.

ITC shares climbed as much as 4.11 percent during intraday trading on the National Stock Exchange (NSE), reaching a high of ₹292.55. On the Bombay Stock Exchange (BSE), the company's shares also advanced nearly 4 percent amid a noticeable rise in trading activity. The stock emerged as one of the top gainers on the NIFTY50 index, outperforming the broader market, which recorded comparatively smaller gains.

The rally came even though ITC reported a significant decline in its quarterly net profit for the April-June period. Investors appeared to focus more on the company's operational performance and future growth prospects after international investment firms issued encouraging reports following the release of its first-quarter earnings.

Global brokerage firm Nomura said that the worst phase for ITC may be behind the company, pointing out that the decline in cigarette volumes was lower than market expectations. According to Nomura's assessment, cigarette volumes fell around 5 percent during the quarter, compared with expectations of a decline of nearly 10 percent. The brokerage viewed the performance as a positive sign, suggesting that consumer demand remained more stable than previously anticipated.

Another global brokerage, Jefferies, noted that ITC's first-quarter earnings were below its estimates but highlighted the stronger-than-expected resilience in cigarette volumes. The firm said that the earnings pressure was largely due to gradual price increases and multiple strategic measures taken by the company to avoid a sudden negative impact following a 50 percent tax increase.

Jefferies further stated that the stability in cigarette volumes could provide ITC's management with greater confidence to implement additional price hikes in the future while maintaining demand levels. The brokerage expects volume performance to remain relatively steady despite pricing challenges and increased taxation.

CLSA also highlighted the impact of major tax changes during the quarter, stating that the period witnessed a substantial increase in cigarette taxes following the replacement of compensation cess with GST and excise duties. The brokerage observed that ITC adopted a cautious pricing strategy by introducing gradual price increases and launching new product variants to reduce the risk of losing customers to the illegal cigarette market.

Apart from cigarettes, ITC's fast-moving consumer goods (FMCG) business excluding cigarettes continued to show steady growth. The segment recorded a year-on-year growth of 12 percent, which was broadly in line with analyst expectations and provided additional support to the company's overall performance.

ITC had reported a 27 percent decline in standalone net profit for the first quarter of FY27. The company's net profit stood at ₹3,579 crore during the April-June quarter compared with ₹4,911 crore in the same period of the previous financial year.

However, the company's revenue from operations showed strong growth during the quarter. ITC's revenue increased by 28 percent year-on-year to ₹26,943 crore, compared with ₹21,070 crore recorded during the corresponding period last year.

The company's earnings before interest, taxes, depreciation and amortisation (EBITDA) declined by 28 percent to ₹4,514 crore in Q1 FY27 from ₹6,261 crore in the same quarter of the previous fiscal year. The EBITDA margin also fell significantly to 16.75 percent from 29.71 percent year-on-year.

Explaining the challenging operating environment, ITC said that the first quarter of FY27 was affected by heightened uncertainty caused by global developments, including the ongoing conflict in West Asia. The company stated that the situation resulted in a sharp rise and volatility in crude oil prices and crude-linked products, along with disruptions in international trade and supply chains.

Despite these challenges and the decline in quarterly earnings, market participants responded positively to the company's results, supported by brokerage reports that highlighted ITC's ability to withstand pressure from taxation changes and maintain business stability.

At around 10:16 am on Monday, ITC shares were trading 3.8 percent higher at ₹291, significantly outperforming the NIFTY50 index, which was up around 0.8 percent at the time. The strong market response indicated investor confidence in ITC's long-term prospects despite short-term earnings pressure.

Disclaimer: This article is intended only for informational purposes and should not be considered investment advice. Investors should consult qualified financial advisors before making any investment decisions.