GPI domestic cigarette volume reaches 1,902 million in Q2 FY27

Godfrey Phillips India Limited’s domestic cigarette volume reached 1,902 million sticks per month in Q2 FY27, up from 1,866 million in Q1 FY27 after the Q4 FY26 tax increase, but below 2,190 million in Q3 FY26. GPI says calibrated pricing is intended to contain the impact on volume amid demand moderation.

How did GPI’s domestic cigarette volumes move after the tax increase?

GPI’s domestic cigarette volume fell from 2,190 million sticks per month in Q3 FY26 to 1,928 million in Q4 FY26, when management says a steep tax increase was implemented. The monthly rate declined further to 1,866 million in Q1 FY27 before rising by 36 million sticks, or about 1.9%, to 1,902 million in Q2 FY27.

The Q2 FY27 recovery did not restore the prior quarterly peak. Volume remained 288 million sticks per month below Q3 FY26 and 83 million below Q2 FY26, when the company reported 1,985 million sticks per month. The presentation therefore shows a modest sequential improvement after two quarters of decline, rather than a return to the level before the Q4 FY26 tax change.

Management says the higher tax burden affected industry profitability and contributed to growth in illicit trade, which it describes as a significant concern for the legal cigarette industry. GPI does not quantify illicit trade or identify its separate effect on the 2,190 million-to-1,928 million quarterly volume decline in Q4 FY26.

What does GPI’s annual cigarette-volume record show?

GPI reported average domestic cigarette volume of 2,001 million sticks per month in FY26, compared with 1,671 million in FY25, an increase of about 20%. The FY26 figure was also more than twice the 930 million sticks per month recorded in FY22, following reported averages of 1,163 million in FY23 and 1,295 million in FY24.

The 2,001 million monthly average for FY26 included quarters before the Q4 FY26 tax increase and therefore does not solely reflect the later demand environment. Q2 FY27’s 1,902 million sticks per month was 99 million below that FY26 average, while the presentation does not disclose a combined first-half FY27 monthly volume average.

The increase from FY24 to FY25 was 376 million sticks per month, followed by a 330 million increase from FY25 to FY26. This annual progression contrasts with the quarterly pattern from Q3 FY26 to Q1 FY27, when the disclosed run rate decreased from 2,190 million to 1,866 million sticks per month.

Why is GPI using calibrated pricing after the tax increase?

GPI says it adopted calibrated pricing to contain the volume impact of the Q4 FY26 tax increase while continuing to invest in brands, product innovation, market execution and portfolio enhancement. Its stated strategic direction includes pricing and mix optimisation to protect margins amid demand moderation following recent tax increases.

The company’s Q2 FY27 financial presentation illustrates why gross sales value and net revenue need to be separated. Gross sales value, which includes applicable indirect taxes, rose 57.4% year on year to Rs 6,254 crore from Rs 3,974 crore, while net revenue increased 4.1% to Rs 1,342 crore from Rs 1,289 crore.

Excise duty was Rs 2,856 crore in Q2 FY27, compared with Rs 343 crore in Q2 FY26. GPI states that gross sales value includes excise duty, National Calamity Contingent Duty, goods and services tax and goods and services tax compensation cess, as applicable in the relevant reporting period.

How did GPI’s profitability change alongside volume trends?

GPI’s operating earnings before interest, tax, depreciation and amortisation, or EBITDA, was Rs 213 crore in Q2 FY27, down 32.2% from Rs 314 crore in Q2 FY26. The operating EBITDA margin declined to 15.9% from 24.4%, while net profit after tax from continuing operations decreased 37.7% to Rs 190 crore from Rs 305 crore.

Sequentially, net revenue rose 11.3% from Rs 1,206 crore in Q1 FY27 to Rs 1,342 crore in Q2 FY27, and EBITDA increased 17.0% from Rs 182 crore to Rs 213 crore. Net profit after tax nevertheless decreased 4.3% from Rs 198 crore to Rs 190 crore, even as domestic cigarette volume rose from 1,866 million to 1,902 million sticks per month.

For the first half, or H1, of FY27, EBITDA was Rs 395 crore, down 39.3% from Rs 651 crore in H1 FY26. Net profit after tax from continuing operations was Rs 388 crore, down 41.3% from Rs 661 crore, and management attributed the profitability decline to the steep tax increase implemented in Q4 FY26.

What are GPI’s stated priorities for cigarettes and exports?

GPI’s first stated priority is to sustain and grow its cigarette business through distribution infrastructure, product innovation and its partnership with Philip Morris International for manufacture and distribution of Marlboro cigarettes in India. The presentation says Marlboro is made and distributed under exclusive procurement and supply agreements with Philip Morris International.

International business is GPI’s second stated priority and covers own-brand cigarettes, unmanufactured tobacco and contract-manufactured cigarettes. The division reported H1 FY27 net sales value of Rs 627 crore, representing 8% of net sales, and has a significant market presence in around 30 countries across Latin America, the Middle East, South East Asia and Eastern Europe.

Management reported unmanufactured tobacco export sales of Rs 591 crore in H1 FY27, contributing 7% of net sales revenue. It said geopolitical factors affected this business and disclosed a plan to expand it through crop-development expertise, product quality and customer relationships, without providing a numerical export target.

Conclusion

GPI’s reported domestic cigarette volume increased sequentially in Q2 FY27, but remained below both the Q3 FY26 high and the FY26 annual average after the Q4 FY26 tax increase. The volume pattern coincided with a rise in sequential net revenue and EBITDA, while year-on-year profitability and margins remained below Q2 FY26 levels.

The next disclosed areas to watch are whether calibrated pricing, mix optimisation, brand investment and market execution sustain volume beyond 1,902 million sticks per month, and whether export expansion progresses despite geopolitical factors. GPI has also identified strengthening its Marlboro partnership in India as a priority, but has not provided a volume target or timetable.