ITC

Q1 FY27 (June 2026 quarter): standalone PAT of ₹3,579 crore, down 27% YoY; EBITDA down 28%. Cigarettes - the dominant profit segment - saw net revenue fall 25% and PBIT fall 35% (margin down roughly 900 basis points), driven entirely by the Feb 2026 GST/excise overhaul; management pushed through 30-plus pricing and pack-size changes to protect volumes rather than letting demand collapse. FMCG-Others (foods, personal care, etc.) grew revenue 12% (16% excluding staples) with PBIT up 21% - healthy, margin-accretive growth, though still a smaller profit pool than cigarettes. Paperboards revenue grew 9% with PBIT up 38%. Agri revenue fell 17% on a reported basis but the company says it was up 9% on an underlying/like-for-like basis due to a deficient monsoon - flagging this as a company-adjusted figure, not independently verified. Hotels do not appear in either this quarter or the year-ago quarter because of the January 2025 demerger, so that part of the YoY comparison is clean. Q2 FY27 numbers are not yet out.

At roughly 16.3-16.5x trailing earnings, ITC trades well below its own historical range (which has run 25-30x) and below FMCG peers like HUL - statistically cheap on an earnings basis. Why it's cheap: the market is pricing in recurring regulatory/tax risk to the cigarette profit pool (roughly 80% of PBIT), not a broken business. Whether it is actually cheap depends on whether February 2026's tax restructuring was a one-time reset - the case Citi made in its October 2026 upgrade (target ₹300, citing ~75% tax pass-through already achieved) - or the first of further hikes, as some brokerages argue given illicit-trade volumes estimated at up to a third of the legal cigarette market. On book value (P/B ~4.5x) and returns (ROE ~29%, 3-year average ~35%) it is not cheap at all - this is an earnings-multiple de-rating tied to tax-policy uncertainty, not a balance-sheet discount.

Mixed by segment. The cigarette decline in Q1 FY27 is tax-led, not volume-led - the company protected underlying volumes through pricing and pack-size changes, so this is margin compression from an external (tax) source rather than demand erosion. FMCG-Others growth (revenue +12%, PBIT +21%) looks closer to genuine volume-and-mix-led growth, helped by digital-first brands and a cloud-kitchen business whose order volumes rose 90% YoY - margin is expanding here too, but off real scale gains rather than cost-cutting alone. Agri's decline was weather-driven (deficient monsoon), flagged as cyclical rather than structural.

Profits convert reliably into cash: ROCE is roughly 39%, debt is near-zero (a small ₹2,399 crore of borrowings as of March 2026 is immaterial for a company this size), and the ~75% dividend payout is funded from genuine free cash flow rather than borrowing. The risk here is business/regulatory, not financial - unpredictable cigarette taxation and a large illicit-trade segment eating into the formal market, not balance-sheet stress.

ITC has no traditional promoter - it is institutionally and professionally run rather than founder/family-controlled, which is itself worth noting since most Indian large-caps are promoter-driven. British American Tobacco (BAT) is the largest shareholder at 22.91% as of June 2026, down from roughly 29% before a series of stake sales in 2024-25; BAT functions as a strategic/financial investor, not a promoter, and there is no pledging since no promoter category exists. FII holding is roughly 34% and DII roughly 49% - that DII figure looks unusually high against ITC's own history and could not be independently cross-checked, so treat it as unverified pending the next official filing. Notable investor GQG Partners recently trimmed its stake from 3.48% to 3.17%, and an undisclosed counterparty block deal moved about 2.9% of equity on 8 October 2026 - worth watching in the next shareholding disclosure.