Why India's top cigarette makers are seeing revenue, profit decline
What's the story
India's top cigarette manufacturers, including ITC, Godfrey Phillips India, and VST Industries, have reported a drop in their net revenue and profitability for the April-June quarter. The decline comes after the government imposed major tax hikes on cigarettes. The three companies together account for 90% of India's domestic cigarette market share with an estimated annual volume of over 100-120 billion sticks.
Tax impact
Government raised GST on cigarettes in February
In February, the government raised the Goods and Services Tax (GST) on cigarettes and tobacco products to a uniform 40%.
The move also replaced the compensation cess with an additional excise duty of ₹2,100-8,500 per 1,000 sticks depending on cigarette length.
Despite reporting rising revenues from operations, these companies have seen their underlying net revenue and profits come under pressure due to this unprecedented tax hike.
Market leader's performance
ITC's revenue from cigarette business jumps 73.72%
As the market leader, ITC saw a whopping 73.72% jump in revenue from its cigarette business to ₹16,596.67 crore in the June quarter.
The company credits this growth to its "staggered pricing approach amidst unprecedented increase in tax."
However, despite this rise, ITC's gross revenue (from sale of products and services) in the cigarette segment has fallen 31.45% to ₹3,769.11 crore from ₹5,498.93 crore last year due to declining sales volumes.
Profit decline
Godfrey Phillips India's net profit falls by over 44%
Godfrey Phillips India's consolidated net profit for the June quarter fell by a whopping 44.3% to ₹198.39 crore.
However, the firm's revenue from operations nearly doubled to ₹3,819.56 crore.
Excluding excise, Godfrey Phillips's net revenue fell by 18.8% to ₹1,206 crore from ₹1,486 crore last year amid declining sales volumes of its brands including Marlboro (Philip Morris), Cavanders, and Four Square, among others.
Revenue surge
VST Industries's revenue nearly doubled in the June quarter
VST Industries's revenue nearly doubled to ₹881.49 crore in the June quarter from ₹424.93 crore last year.
However, its profit after tax fell by 24.42% to ₹42.42 crore from ₹56.13 crore in Q1 of FY26 due to the impact of the sharp tax increase on its business operations and profitability margins.