The decline was reported after sharp increases in taxes on cigarettes by the government.
According to reports, the three companies hold 90 per cent of the domestic cigarette market-share, with an estimated annual volume of over 100-120 billion sticks.
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The government raised the goods and services tax (GST) on cigarettes and tobacco products to a flat 40 per cent in February, earlier this year. This move also replaced the compensation cess with a new additional excise duty ranging from Rs 2,100-8,500 per 1,000 sticks, depending on cigarette length.
Despite cigarette companies reporting increasing revenues (from operations), their underlying net revenue and profits were under pressure with the companies grappling with the effects of the unprecedented tax increase.
ITC, the market leader, saw revenue from its cigarettes business grow 73.72 per cent to Rs 16,596.67 crore from Rs 9,553.86 crore a year earlier in the June quarter. The company attributed the rise to its “staggered pricing approach amidst unprecedented increase in tax”.Read more:
The company’s gross revenue (from sale of products and services) in the cigarette segment, which strips out duty pass-through, has however fallen 31.45 per cent to Rs 3,769.11 crore, from Rs 5,498.93 crore in the year-ago quarter, which points to a hit on underlying sales volumes.
ITC said it mounted a “A strategic and calibrated response by the Cigarettes Business to the unprecedented increase in tax, balancing the interests of all stakeholders”.
The company owns cigarette brands including India Kings, Insignia and Classic in the premium segment, and Gold Flake, Wills Navy Cut, Scissors, Capstan and Players in the mass-market segment.
The consolidated net profit of Godfrey Phillips India reported a 44.3 per cent decline to Rs 198.39 crore for the June quarter. Meanwhile, on account of Rs 2,614 crore in excise duty paid during the quarter, revenue from operations of the Modi Enterprises firm nearly doubled to Rs 3,819.56 crore.
The company said that its net revenue, excluding excise, fell 18.8 per cent to Rs 1,206 crore, from Rs 1,486 crore in the year-ago period,
Brands such as Cavanders, Four Square, Red & White, Stellar, North Pole and Tipper are sold by Godfrey Phillips, besides Marlboro, which is owned by Philip Morris.
VST Industries said its quarterly performance was also weighed down by the sharp tax increase. It owns the Total, Editions and Charms brands.
The company’s revenue nearly doubled to Rs 881.49 crore in the June quarter, from Rs 424.93 crore a year earlier, however, profit after tax fell 24.42 per cent to Rs 42.42 crore, from Rs 56.13 crore in the first quarter of FY26.
The firm’s net revenue fell 13.5 per cent to Rs 256 crore, which includes Rs 216 crore from the cigarette business and Rs 40 crore from unmanufactured tobacco, against Rs 296 crore (Rs 255 crore and Rs 41 crore, respectively) in the corresponding quarter of FY26.
The cigarette volume (average per month in million) for VST Industries shrank 14 per cent to 611 from 714 of the corresponding period a year ago.
The government revamped the taxation structure for tobacco products by imposing an additional excise duty over and above the highest GST slab of 40 per cent on cigarettes and other tobacco products and a health cess on pan masala, with effect from February 1.
The earlier tax regime of 28 per cent GST plus compensation cess, which was applicable since the rollout of the GST system in July 2017, has been replaced.
Short non-filter cigarettes of up to 65 mm attract an additional duty of about Rs 2.05 per stick, while short filter cigarettes of the same length are subject to an additional duty of around Rs 2.10 per stick, under the revised scheme.
Manufacturers, prompted by the immediate increase in cigarette prices to Rs 22-25 per pack of 10 sticks after the implementation of the new duty structure, undertook calibrated price hikes and portfolio adjustments at that time after the implementation of the new duty structure.