ITC margin drops 11.75 points as expenses outpace revenue
Consolidated net profit fell 15.62% year on year, with lower tax and other income cushioning the decline in operating earnings.
Filed 31 Jul 2026, 16:31 IST · after market close · ITC Ltd (ITC)
Key takeaways
- Consolidated operating margin fell 11.75 percentage points sequentially to 27.10% as expenses grew 27.83%, far faster than revenue at 7.24%.
- Net profit declined 15.62% year on year to Rs 4,508.79 cr, despite a 1.97-percentage-point reduction in the tax rate.
- Other income contributed 19.58% of pre-tax profit, while operating margin remained 10.96 percentage points above the 16.14% median of 18 reported FMCG peers.
Price around the results
Sequential margin reversal drives the quarter
Consolidated revenue rose 7.24% sequentially, but operating profit fell 25.18% because expenses increased 27.83%. Operating margin therefore dropped 11.75 percentage points to 27.10%, reversing the improvement from 31.71% in Q1FY26 to 38.85% in Q4FY26. Year on year, revenue declined 11.07% and operating profit fell 23.99%.
Lower tax and other income softened the profit decline
The tax rate fell 1.97 percentage points year on year to 23.07%, which helped net profit decline less than pre-tax profit: net profit fell 15.62% against a 17.78% fall in pre-tax profit. Other income rose 52.80% year on year and accounted for 19.58% of pre-tax profit, making reported earnings less dependent on operating profit. Interest expense also rose 141.53% year on year, although depreciation increased only 1.13%.
ITC remains above the reported FMCG peer median
ITC's 27.10% operating margin was 10.96 percentage points above the 16.14% median for the 18 FMCG peers that had reported the quarter. The quarterly margin trend had improved from 31.71% in Q1FY26 to 34.33% in Q2FY26 and Q3FY26, then 38.85% in Q4FY26, before this quarter's sharp decline. This makes the sequential contraction more notable than the year-on-year comparison alone.
Results were filed after market close
The consolidated results were filed after market close, so there was no market reaction yet. Across the last eight results, the stock rose after six and fell after two, with a median absolute move of 1.11%.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹19,114 cr | ₹17,825 cr | +7.24% | -11.07% |
| Other income | ₹1,148 cr | ₹700 cr | +64.04% | +52.80% |
| Expenses | ₹13,934 cr | ₹10,900 cr | +27.83% | -5.07% |
| Operating profit | ₹5,181 cr | ₹6,924 cr | -25.18% | -23.99% |
| Operating margin (%) | 27.10% | 38.85% | — | — |
| Interest | ₹40 cr | ₹29 cr | +36.33% | +141.53% |
| Depreciation | ₹428 cr | ₹422 cr | +1.37% | +1.13% |
| Profit before tax | ₹5,861 cr | ₹7,173 cr | -18.29% | -17.78% |
| Tax | ₹1,352 cr | ₹1,703 cr | -20.60% | -24.24% |
| Net profit | ₹4,509 cr | ₹5,470 cr | -17.57% | -15.62% |
| EPS (₹) | ₹3.51 | ₹4.30 | -18.37% | -16.23% |
Operating margin of 27.10% compares with a Fast Moving Consumer Goods sector median of 16.14% across 18 peers that have reported Q1FY27.
What to watch
- Whether operating margin recovers from 27.10% after the 11.75-percentage-point sequential decline.
- Whether expense growth falls below the 27.83% sequential increase recorded against 7.24% revenue growth.
- Whether other income remains near its 19.58% share of pre-tax profit.