Excessive rains in many parts of the country and transition to new GST rates posed operational challenges, especially for the FMCG categories, causing short-term business disruptions during the July-September quarter, said leading fast-moving consumer goods (FMCG) player ITC Ltd on Thursday while declaring its Q2FY26 earnings numbers.
The diversified conglomerate reported a standalone net profit of Rs 5,180 crore for the second quarter of the current fiscal, up 2% from Rs 5,078 crore in the same period last year. Revenue stood at Rs 18,021 crore, reflecting a 3.4% decline from Rs 18,648 crore in Q2 of the previous year.
Now that the new GST rates have come into effect, ITC said that the reforms introduced during the quarter are expected to enhance consumer affordability, boost consumption, revitalise small and medium enterprises, stimulate a virtuous cycle of economic growth & accelerate India’s journey to ‘Viksit Bharat’.
“Lower inflation, reduction in interest rates & liquidity support by RBI, income tax cuts announced in the recent Union Budget along with front loading of government expenditure, and the recent reduction in GST rates across a wide range of products are expected to progressively bolster consumption,” it added.
Not only ITC, but other consumption companies also faced operational challenges and a slowdown in demand from the time a cut in GST rates was announced in mid-August and the new rates came into effect on September 22.
For a large number of ITC products such as biscuits, soaps and noodles, tax rates have come down from 18% and 12% to 5%. Tobacco and related products including pan masala and cigarettes, which fall under the sin product category, will remain under the current tax system of 28% GST plus compensation cess until a later date.
ITC reported that the FMCG - Others segment sustained its revenue growth momentum amidst operational challenges, up 8% YoY (ex-Notebooks). This segment’s revenue came at around Rs 6,000 crore in Q2FY26. Commodity prices stabilised at elevated levels and this segment’s EBITDA margins stood at 10% in Q2. ITC stated that businesses continued to mitigate impact through focused cost management initiatives, premiumisation and calibrated pricing actions.
ITC's revenue from the cigarettes segment went up 6.7% YoY to Rs 8,723 crore in Q2. ITC stated that its strategic portfolio and targeted market interventions, especially focusing on competitive belts and combating illicit trade, are helping drive volume-led growth and strengthening its market position.