ITC expects consumption uptick on rains, rate cuts

Mint

22-05-2025

ITC Ltd on Thursday predicted India's consumption engines to keep firing as inflation cools, interest rates fall, and rain clouds gather, following a similar prognosis by industry leader Hindustan Unilever Ltd.
Consumption spending is expected to rise steadily as a good monsoon powers a continued rural recovery, the maker of Bingo chips and Gold Flake cigarettes said; alongside, lower inflation and the recent income tax cut are expected to boost disposable incomes in towns and cities. The company expects India's macro-economic variables to remain stable in the year ahead.
"The cumulative impact of pick-up in government capex in the second half of FY25 and front-loading of capex outlay in FY26, along with interest rate cuts and liquidity support from RBI, would also be supportive of growth," ITC said in a filing.
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India's second-largest consumer goods maker reported a 289% jump in March quarter profit, thanks to an exceptional gain from the demerger of its hotels business. Profit touched ₹19,561.57 crore, up from ₹5,020 crore a year earlier. Excluding profit from exceptional items, profit stood at ₹4,875 crore, up 0.77%. ITC's hotels demerger took effect on 1 January this year.
A Bloomberg survey of 22 analysts had estimated ITC to report standalone March revenue of ₹16,979 crore, while 18 analysts estimated a net profit of ₹4,942 crore.
'Adjusted profit after tax came in line with our but 2.5% below consensus estimates," Abneesh Roy, executive director, Nuvama Institutional Equities. Roy said revenue and Ebitda were largely in line with Nuvama's estimates. Ebitda is short for earnings before interest, tax, depreciation, depreciation and amortization.
Standalone revenue from operations in the fourth quarter grew 9.4% to ₹18,494.06 crore, up from ₹16,907.18 crore in the same quarter of FY24. Expenses grew 12.7% to ₹12,872.66 crore.
On 25 April, HUL had said that this is 'a good moment" for the consumer packaged goods industry, as India's macros turn favourable. 'Monsoons have been good, projections have been decent, reservoirs are full, and agri output is strong," chief executive officer and managing director Rohit Jawa said at a post-earnings meet.
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For the full year FY25, ITC recorded overall profit after tax (including profit from discontinued operations)of ₹35,196 crore, up 72.3% year-on-year. Standalone revenue from operations grew 10.31% to ₹74,236.07 crore. Earnings per share for the year stood at ₹16.07, against the previous year's ₹15.98.
The ITC board recommended a dividend of ₹7.85 per share for FY25. Together with the interim dividend of ₹6.50 paid on 7March, the total dividend for the year totals to ₹14.35 per share.
During the quarter, ITC's FMCG business reported a 3.6% increase in revenue to ₹5,494.63 crore, while profit decreased 28%.
ITC reported severe price pressures in edible oil, wheat, maida, potato, cocoa and packaging inputs—especially in the second half of the year. These pressures were partially mitigated through focused cost management, portfolio premiumization, supply chain agility, digital interventions and calibrated pricing actions, ITC said.
ITC said atta, spices, snacks, frozen snacks, dairy, premium personal sash, homecare and agarbatti business led growth during the quarter. It also reported heightened competitive intensity in certain categories such as noodles, snacks, biscuits and popular soaps.
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ITC's 'Classmate' notebook business faced stiff competition from smaller brands, which cashed in on the drop in paper prices.
'The FMCG segment delivered a resilient performance amidst weak demand conditions and significant increase in competitive intensity from regional-local players. Costs of several major inputs such as edible oil, wheat, maida, potato and cocoa witnessed sharp escalation, especially in the second half of the financial year, weighing on margins…The business sustained competitive levels of trade and marketing investments during the year towards supporting growth and market standing," the company said.
Last month, rival HUL reported a 2% increase in revenue and volumes in the March quarter. Its management pointed to stressed demand in urban markets on account of high inflation that outpaced wage growth, leading consumers to prioritize essentials over discretionary items.
ITC, which sells Sunfeast cookies and Aashirvaadstaples, introduced over100 new FMCG products during the year. Its cigarettes business reported a 6% jump in quarterly revenues as volumes rose.
'Cigarette volumes increased 5% year-on-year, slightly ahead of our estimate of 4%," said Nuvama's Roy. Sharp cost escalation in leaf tobacco partly mitigated through improved mix and focused cost management initiatives, during the quarter.
In the fourth quarter, segment revenuefor its agriculture business was up18% year-on-year to ₹3,649.16 crore.
The paperboards, paper and packaging segment remains impacted due to low-priced Chinese and Indonesian supplies in global markets including India, soft domestic demand conditions and unprecedented surge in wood prices, the company said.The segment reported revenue growth of 5.5% to ₹2,187.62 crore.
Rising domestic wood prices and lower selling prices are squeezing margins. ITC is addressing this through plantation initiatives, product optimization and cost control.
'Representations continue to be made at appropriate forums for suitable measures to safeguard domestic industry," ITC said.
The company will continue to monitor urban demand recovery, inflation trajectory and private capex going forward.It continues to remain concerned about the impact of reciprocal trade tariffs and geopolitical disruptions.