ITC Result Explained: The Real Reason Behind The 72% Profit Fall

ITC’s Q4 FY26 result shocked many investors after the company reported a massive 72% fall in profit, with the stock also closing nearly 2% lower in today’s trading session after the results announcement.

At first glance, the numbers looked worrying. Consolidated profit dropped from nearly ₹19,808 crore in Q4 FY25 to around ₹5,470 crore in Q4 FY26.

But the headline number does not tell the full story. The sharp decline was mainly caused by a one-time gain that ITC had booked last year due to the demerger of its hotel business into a separate entity (ITC Hotel). That gain was reported under discontinued operations, which significantly inflated last year’s profit base.

This year, that exceptional gain disappeared. So while the reported profit fell sharply, ITC’s actual operating business remained relatively stable and even improved in several areas.

First, Understand How ITC Operates

ITC today is a diversified conglomerate, not just a cigarette company. The company operates across multiple businesses including:

• Cigarettes
• Packaged foods
• Personal care
• Dairy and beverages
• Agri business
• Paperboards and packaging

What makes ITC unique is that many of these businesses support each other. Its cigarette business generates strong cash flows and profits. ITC then uses those profits to build newer FMCG brands like Aashirvaad, Sunfeast, Bingo, YiPPee, Savlon and Engage.

The agri business helps source raw materials and commodities, while the packaging business supports FMCG operations. Over time, ITC has created an integrated ecosystem rather than operating unrelated businesses separately.

This is why understanding segment-wise performance matters more than looking only at one headline profit number.

So Why Did ITC’s Profit Fall 72%?

The answer lies in discontinued operations and the hotel demerger.

In Q4 FY25, ITC had booked a very large one-time gain related to the demerger of its hotel business into a separate listed entity. Because of this, last year’s profit number became unusually high.

That one-time gain does not exist in this quarter, which is why the comparison looks so dramatic.

So the comparison itself is distorted. The business did not suddenly weaken. Last year’s number simply had a temporary boost from the hotel demerger, which inflated the base.

If we remove that one-time impact and focus only on continuing operations, the picture becomes much clearer.

ITC’s core business actually improved during the quarter:

• Revenue from operations increased to ₹23,821 crore
• Profit before tax from continuing operations rose to ₹7,173 crore
• Profit after tax from continuing operations also improved to ₹5,470 crore

This means ITC’s actual operating businesses continued growing despite the scary 72% profit fall headline.

Cigarette Business Continued To Drive Earnings

The cigarette segment remained ITC’s biggest profit engine.

Q4 cigarette revenue rose sharply to ₹11,952 crore, while segment profit increased to ₹5,797 crore.

This business continues to generate the cash flows that fund ITC’s expansion into newer categories.

The quarter also saw the impact of higher GST and excise duty on cigarettes after the expiry of GST compensation cess from February 2026.

FMCG Business Continued Improving

ITC’s FMCG business also showed steady progress. The FMCG Others segment, which includes foods, personal care, dairy, beverages and stationery products, reported revenue of ₹6,352 crore in Q4.

Segment profit improved significantly to ₹526 crore.

Importantly, EBITDA for the FMCG Others segment also improved strongly. Standalone FMCG Others EBITDA rose to ₹671 crore during the quarter from ₹490 crore last year.

This is important because ITC has spent years investing heavily in branding and distribution for its FMCG portfolio. The business was once considered margin-dilutive, but profitability is now steadily improving.

Agri And Packaging Businesses Were Mixed

The agri business remained a large contributor but profitability softened during the quarter.

Meanwhile, the paperboards and packaging business remained stable.

While these businesses may not attract as much attention as cigarettes or FMCG, they are strategically important because they strengthen ITC’s integrated business model.

Why The 72% Profit Fall Is Misleading

The biggest issue with the headline number is that it compares a normal quarter with a quarter that included a massive one-time gain. That creates a distorted picture.

If investors only focus on reported profit after tax, they may incorrectly assume ITC’s business weakened sharply. But once the discontinued operations gain is removed, the company’s operating performance actually looks stable.

The reality is:

• Revenue grew
• Core profits improved
• Cigarette business remained strong
• FMCG profitability improved further

This is why analysts usually focus more on continuing operations and segment performance rather than only headline PAT numbers.

Author’s Take

ITC’s Q4 result is a classic example of why headline profit numbers can sometimes mislead investors.

The 72% fall looks dramatic, but operationally the business remained fairly resilient. In fact, the quarter showed that ITC’s diversified structure is becoming stronger over time.

The cigarette business continues funding growth, FMCG margins are gradually improving, and the company’s integrated ecosystem across agri and packaging gives it long-term stability.

The bigger takeaway from this result is not that profits collapsed, but that ITC is slowly transitioning into a broader consumer business while still benefiting from the cash-generating strength of cigarettes.