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Informist, Friday, Jul. 25, 2025

By Avishek Rakshit

KOLKATA – Even as raw material costs continue to remain high amid tepid urban demand, ITC Ltd. is hopeful of progressive improvement in its consumer goods vertical over the coming months. The cigarettes-to-soaps major expects to report growth of 80-100 basis points on year in its margin from the consumer goods business.

ITC Chairman and Managing Director Sanjiv Puri credited easing interest rates and benign inflation for driving the projected bounce-back in consumer demand. He also said an improvement in operations of the consumer goods division, backed by further diversification of the company's portfolio, will be key to an improvement in margin from the consumer goods business.

Responding to queries from shareholders at the company's 114th annual general meeting, Puri said gestation costs arising from new categories and the company's focus on developing integrated consumer goods manufacturing and logistics facilities are included in the financial performance of its consumer goods business. However, he is hopeful that this business vertical will continue to remain a major growth driver for ITC and increase the margin from its operations in the coming days.

"These (gestation) costs are embedded (in the financial reporting), but we remain committed to the guidance of 80-100 basis points increase in (the) margins year-on-year," Puri told shareholders. He also sounded a note of caution over possible periods of disruption when such a guidance may not fructify. "Of course, this will not be linear; there could be periods where there would be challenges. But if you see over a period of time, this is the trajectory, we expect, will sustain," he said, adding that although commodity costs are still high, aggregate inflation is more modest and so ITC expects progressive improvement.

The company had reported a substantial decline in its earnings before interest, tax, depreciation, and amortisation margin for the March quarter, citing inflation in prices of edible oil, wheat, potatoes, cocoa, and packaging materials, among others. Its EBITDA margin in Jan-Mar slipped to 8.9% from 11.3% a year ago. The EBITDA margin for the March quarter was also lower than the company's annualised EBITDA margin of 9.8%.

The consumer major's profit before tax from the non-cigarette consumer goods portfolio for the March quarter fell almost 28% on year to INR 3.4 billion. For FY25, it was down 11% on year at INR 15.8 billion. Puri said the company is working to strengthen its foods categories in the health and wellness and organic segments, believing these to be the categories driving future growth.

CIGARETTES COMMENTARY
Puri said the company's focus on a premiumised cigarettes portfolio, new products, and extensive geographic reach is driving its sales and increasing market share. While ITC does not declare the volume growth from its cigarettes business, sector analysts expect it to be in the range of 2-6% depending upon the quarter and consumer sentiment.

ITC is focusing on reducing its dependency on the cigarettes business by strengthening its consumer goods, agricultural trading, and paper and paperboards verticals. While these businesses now account for 65% of the company's overall revenue, cigarettes remain the growth driver of the company, contributing over 75% to its profit before tax. ITC's cigarettes business remains the most profitable business vertical within the company.

Puri said stable taxes will help the cigarettes business maintain its growth momentum while high taxes will disrupt it. Friday, shares of ITC closed flat at INR 409.40 on the National Stock Exchange.

Edited by Nishant Maher

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