ITC Ltd Q2 FY27 Results Analysis: PAT Falls 18%, EBITDA Margin Compresses 650 bps
ITC Ltd's Q2 FY27 numbers came in mixed, with revenue of Rs. 30,578.40 Cr (+43.86% YoY) and PAT growth of -18.46% YoY. Here's a quick read of what worked, what to watch, and what management said.
| Results date | November 02, 2026 |
|---|---|
| Revenue (Q2) | Rs. 30,578.40 Cr (+43.86% YoY) |
| PAT (Q2) | Rs. 4,229.33 Cr (-18.46% YoY) |
| EBITDA margin | 28.54% (-650 bps YoY) |
| EPS (Q2) | Rs. 3.32 (-18.83% YoY) |
Quarter Snapshot
The 43.86% revenue headline is an excise pass-through artifact; underlying net revenue grew 4.29% while PAT fell 18.46% YoY on the cigarette tax reset, with ex-excise EBITDA margin down 650 bps YoY. Sequential recovery is visible — cigarette PBIT margin improved to 24.55% from 21.72% and FMCG-Others margin expanded to 10.01% — while the CPP acquisition was cash-funded with borrowings cut to Rs.242.93 crore. No FY-level numeric guidance exists in the record, so no guidance beat or miss is computable; Q3 offers the cleaner read of the reset base.
Q2 FY27 Expectations vs Results
| Driver | What happened | Verdict |
|---|---|---|
| Cigarette decline "may moderate from Q1's −25% net revenue / −35% segment results rather than deepen" | net-rev proxy −23.67%; results −27.23% (SA) vs −35% in Q1 | Played out |
| "FMCG-Others should stay ahead" | revenue +19.13%, results +31.45% | Played out |
| Margin compression "partial rather than severe" | EBITDA margin 10.01% vs 9.79% LY | Played out |
| "Gross-revenue growth again overstates the underlying top line" | +43.86% headline vs +4.29% net; excise delta Rs.8,555.54 cr | Played out |
| "Agri faces the West Asia trade-disruption overhang" | Agri +12.70% revenue, +14.29% results — better | Contradicted |
| Paper: "first partial CPP quarter" on MIP tailwind | +35.90% revenue, +50.68% results | Played out |
| "Finance cost continues to rise off a small base" | +90.87% (Rs.38.27 cr); H1 Rs.78.05 cr vs Rs.36.52 cr | Played out |
| September price increases "claw back some of the Q1 hit" | cigarette margin 24.55% (SA) vs 21.72% Q1; results +14.13% QoQ | Played out |
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Management Guidance vs Delivery
| What management said | Where | What happened | Verdict |
|---|---|---|---|
| FMCG-Others EBITDA margin ~10% trajectory (Q1: 10% ex-Sresta; FY26: 10.0%) | Q1 FY27 media statement / FY26 presentation | 10.01% (EBITDA Rs.722.86 cr) | Met |
| "Prices are expected to moderate going forward" (paper wood) | Q4 FY26 media statement | Paper results +50.68% YoY, margin 9.06% vs 8.17% | On Track |
| Cigarettes "tracking well in line with internal plans" | Q1 FY27 media statement | Results −25.95% YoY but QoQ recovery (SA +14.13%); net-rev proxy −23.67% vs Q1's −25% | On Track |
| Leaf tobacco demand "expected to be subdued" | Q4 FY26 media statement | Agri results +14.29% YoY; leaf-tobacco split not disclosed | Too Early |
Key Numbers, Quarter by Quarter
| Metric | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| SA cigarette net-rev proxy YoY % | — | −25.0 | −23.67 |
| Cigarette PBIT margin % | 60.08 | 21.72 | 24.55 |
| FMCG-Others EBITDA margin % | 9.79 | 9.44 | 10.01 |
Key Investment Insights
Key Positives
- Net revenue (ex-excise) grew 4.29% YoY to Rs.20,121.24 crore and 5.90% QoQ; the 43.86% headline is an excise pass-through artifact (Rs.8,555.54 crore excise delta)
- FMCG-Others results grew 31.45% YoY with segment EBITDA margin expanding to 10.01% from 9.79% LY despite edible-oil/soap-noodle inflation
- Paperboards segment results grew 50.68% YoY with margin at 9.06% vs 8.17% LY, plus first ~2 months of Century Pulp and Paper consolidation
- Agri business revenue grew 12.70% and results 14.29% YoY as the West Asia disruption faded; results +44.19% QoQ
- Standalone cigarette PBIT margin recovered to 24.55% from 21.72% in Q1, with results +14.13% QoQ and net-revenue proxy decline moderating to −23.67% from −25%
- Borrowings reduced to Rs.242.93 crore from Rs.2,186.22 crore; H1 FCF of Rs.7,276.99 crore funded Rs.3,994.28 crore of acquisitions and Rs.10,026.20 crore of dividends
- ETR stable at 25.73% vs 25.68% LY with no tax drag; deferred tax only 3.8% of the charge
Risk Factors
- Consolidated PAT declined 18.46% YoY to Rs.4,229.33 crore; normalized PAT declined 17.04%
- Ex-excise EBITDA margin compressed 650 bps YoY to 28.54% following the February 1, 2026 cigarette tax increase
- Cigarette segment result fell 25.95% YoY to Rs.4,044.49 crore with PBIT margin at 24.91% vs 58.02% LY
- Standalone cigarette net-revenue proxy fell 23.67% YoY, reflecting the tax-driven demand/pricing reset
- Finance costs rose 90.87% YoY to Rs.38.27 crore and D&A rose 12.83% on CPP consolidation
- H1 dividends paid of Rs.10,026.20 crore exceeded H1 PAT-to-owners of Rs.8,562.53 crore, reducing other equity by Rs.1,105.68 crore
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Disclaimer: This results analysis is published for educational and informational purposes only. It is not investment advice, not a recommendation to buy, sell or hold any security.