ITC margin widens to 38.85%, but net profit drops 72.39% YoY
Expenses fell faster than revenue, lifting operating margin 4.11 percentage points; the stock later fell 6.71% in five sessions.
Filed 21 May 2026, 15:22 IST · ITC Ltd (ITC)
Key takeaways
- Consolidated operating margin widened 4.11 percentage points year on year to 38.85% as expenses fell faster than revenue.
- Net profit declined 72.39% year on year even as profit before tax rose 4.92%, making the earnings comparison unusually weak below the operating line.
- The stock fell 6.71% over five sessions after a muted 0.16% filing-day move, well beyond its 1.17% median post-results move.
Price around the results
Operating profit rose despite a 5.01% revenue decline
ITC’s consolidated revenue fell 5.01% year on year, but operating profit increased 6.21% because expenses declined 10.98%. Sequentially, revenue dropped 11.09%, while the sharper 17.20% fall in expenses kept operating profit broadly stable, up 0.61%.
Cost control lifted the margin to 38.85%
Operating margin expanded 4.11 percentage points year on year and 4.52 percentage points sequentially, as costs fell faster than revenue in both comparisons. The margin also rose from 34.33% in each of Q2FY26 and Q3FY26, reaching its highest level in the five-quarter trend. Interest expense increased 167.46% year on year and 49.87% sequentially, but remained a smaller drag than the operating improvement.
Profit quality is weaker below the operating line
Profit before tax rose 4.92% year on year, while net profit fell 72.39%; the sharp divergence makes the year-ago net profit comparison the key caveat to the quarter. The tax rate declined 0.85 percentage points year on year and 1.96 percentage points sequentially, which supported earnings, while other income contributed 9.75% of pre-tax profit.
ITC remained well above the reported FMCG peer median
ITC’s 38.85% operating margin was 22.10 percentage points above the 16.75% median for the 26 FMCG peers that had reported the same quarter. The sequential margin recovery followed a flat 34.33% reading in Q2FY26 and Q3FY26, rather than a continuation of the earlier quarter-to-quarter volatility.
The delayed market response was larger than ITC’s usual move
The stock gained 0.16% on the filing day, after opening 0.75% higher, but fell 1.90% the next session and 6.71% over five sessions. That five-session decline was much larger than the 1.17% median absolute move after the company’s last eight results, although a corporate-action overlap was recorded.
Q4FY26 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹17,825 cr | ₹20,047 cr | -11.09% | -5.01% |
| Other income | ₹700 cr | ₹322 cr | +117.34% | -5.30% |
| Expenses | ₹10,900 cr | ₹13,165 cr | -17.20% | -10.98% |
| Operating profit | ₹6,924 cr | ₹6,883 cr | +0.61% | +6.21% |
| Operating margin (%) | 38.85% | 34.33% | — | — |
| Interest | ₹29 cr | ₹19 cr | +49.87% | +167.46% |
| Depreciation | ₹422 cr | ₹431 cr | -2.06% | +2.66% |
| Profit before tax | ₹7,173 cr | ₹6,754 cr | +6.20% | +4.92% |
| Tax | ₹1,703 cr | ₹1,736 cr | -1.89% | +1.31% |
| Net profit | ₹5,470 cr | ₹5,018 cr | +8.99% | -72.39% |
| EPS (₹) | ₹4.30 | ₹3.94 | +9.14% | -72.73% |
Operating margin of 38.85% compares with a Fast Moving Consumer Goods sector median of 16.75% across 26 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +0.16% | +0.18% |
| Next session | -1.90% | — |
| 5 sessions | -6.71% | -6.24% |
| 15 sessions | -7.30% | — |
| 30 sessions | -6.28% | — |
Volume on the results session was 1.27× its 20-day average.
What to watch
- Whether consolidated operating margin holds above 38.85%.
- Whether revenue improves from the 5.01% year-on-year decline.
- Whether other income remains around its 9.75% share of pre-tax profit.