ITC Q4FY26 Preview: Revenue Up 4-5%, PAT Seen Lower

Muted March quarter expected for ITC

ITC Limited is expected to post a muted Q4FY26 (March 2026 quarter) performance, with brokerages largely pencilling in low single-digit growth. Estimates suggest the company’s overall revenue may grow only marginally as pressure in cigarettes and parts of the agri business offsets steady momentum in packaged foods and other FMCG categories. Several analysts also flagged that ongoing geopolitical tensions are unlikely to have a material impact on staple companies like ITC in the March quarter, citing limited exposure to West Asia. The core issue for the quarter, instead, is taxation on cigarettes and the near-term demand response to higher prices. The market is also watching whether ITC’s diversified portfolio helps cushion earnings volatility.

Revenue outlook: a narrow band of growth estimates

Brokerages cited in estimates expect ITC’s Q4 revenue to land in a tight range, with year-on-year growth forecasts clustering between 4% and 5.2%. Nirmal Bang expects ITC to report revenue of ₹18,116.1 crore, implying 5% YoY growth, and expects the quarter to be broadly flat sequentially. Axis Securities expects 5.2% YoY growth with revenue at ₹17,897 crore. Systematix Institutional Equities pegs revenue at ₹17,999 crore. These forecasts reflect a split picture: resilient FMCG growth on one side, and cigarettes facing a consumption and margin hit after a significant tax increase.

Cigarettes: volumes subdued, taxation the main overhang

The cigarettes business is expected to remain under pressure, with brokerages differing on the degree of volume resilience. Citi expects cigarette business revenue to decline around 2% YoY in Q4FY26 and cigarette volumes to remain largely flat, attributing the impact to higher taxation during the quarter. Nuvama expects cigarette net revenue to decline around 3% and cigarette EBIT to decline around 7%. Axis Securities also expects flattish volumes after a steep tax hike, and noted that pricing actions may be more calibrated than a full pass-through, to protect the legal franchise and limit downtrading to illicit products.

Taxes from February 1 and implications for pricing

Brokerage notes describe a substantial tax hike taking effect on February 1, 2026. The revision included new excise duties and a 40% GST rate, raising the overall tax burden by an estimated 45-50%. Jefferies and Motilal Oswal, as referenced by the estimates, suggest ITC may need to raise prices by about 40% to cover these costs, which could weigh on sales volumes. Centrum Broking estimates the tax increase at 35-55% depending on stick length for filter cigarettes, and said this could require MRP hikes of 20-35% to negate the tax incidence. The same note cautioned that steep MRP hikes could lead to a double-digit decline in cigarette volumes in FY27E.

FMCG and other businesses: steady growth, but not enough to offset cigarettes

FMCG is expected to remain the steadier part of ITC’s mix in the quarter. Systematix expects the FMCG segment to grow 8% YoY, while Axis Securities expects FMCG growth at 10% YoY. Systematix also expects the agri business to post mid-to-high single-digit growth on a high base, while the paper business is expected to remain moderate. Axis expects the agri business to grow 12%. Even with these growth rates, brokerages broadly expect the cigarette tax shock to dominate consolidated margin movement in Q4.

Margin expectations: cigarette profitability seen tightening

Citi expects cigarette EBIT to decline around 5% YoY and cigarette margins to contract by nearly 70 basis points to 56.9%, citing rising leaf tobacco costs and inadequate price hikes during the quarter. Separately, brokerage estimates suggest gross margins may remain broadly stable around 54-54.5%. Systematix expects contraction in margins in Q4 on both YoY and QoQ basis due to the sharp increase in cigarette taxation during the quarter. Nirmal Bang expects a sharper EBITDA margin contraction, estimating EBITDA margin at around 29.1%, down about 560 bps YoY and about 570 bps QoQ.

Profit expectations: EBITDA and PAT seen lower in Nirmal Bang estimates

The most detailed profit line estimates in the provided brokerage set come from Nirmal Bang. It forecasts absolute EBITDA of ₹5,271 crore, down about 11.9% YoY (and down about 15.9% QoQ). Profit after tax (PAT) is estimated at ₹4,205.9 crore, down about 13.7% YoY (and down about 20.6% QoQ). These projections underline operating leverage risk when cigarette margins tighten, even if the rest of the portfolio holds up.

What changed from the December quarter baseline

In Q3FY26 (December quarter), ITC reported 6.2% YoY revenue growth, driven by strong performance in FMCG-Others and steady momentum in cigarettes. Cigarette segment revenue grew 8%, supported by 7% volume growth, but margins slipped to 59.9% and contracted 163 basis points YoY due to high-cost leaf inventory. That prior-quarter margin compression provides context for why brokerages now expect a further step-down in profitability in Q4, particularly with the February tax changes coming into effect late in the quarter.

Street stance: downgrades, multiples cut, and Budget expectations

Some brokerages have turned more cautious on the stock in response to cigarette tax changes and the uncertainty around pricing and illicit trade risk. Nuvama downgraded ITC from ‘buy’ to ‘hold’, citing expected negative impact on sales and operational income. Antique Stock Broking cut its EV/EBITDA multiple for the cigarette business to 13 times from 16 times earlier due to near-to-medium term uncertainty linked to price hikes from February 1. Nuvama also expects no further cigarette tax increase in Budget 2026, given taxes have already been raised substantially.

Key numbers to track in Q4FY26

Market impact: what the estimates imply for investors

The Q4FY26 setup highlights how a steep change in cigarette taxation can quickly change the earnings mix for a staples company with a large tobacco profit pool. Brokerages are not pointing to demand shocks from geopolitics in West Asia for the March quarter, but they are focused on near-term pricing decisions, volume elasticity, and illicit trade risk. The estimates also show a divergence across models: some expect cigarette volumes to stay flat, while Systematix expects cigarette volume and value growth of 10% and 23% YoY, respectively, aided by price hikes. For investors, the key market-sensitive variables are cigarettes volumes, cigarette margin trajectory, and whether FMCG growth near 8-10% can compensate for tobacco pressure.

Analysis: why Q4FY26 matters beyond one quarter

The February 1 tax hike creates a near-term earnings reset point, as companies balance price hikes against volume protection. The brokerage commentary suggests ITC’s biggest concern remains regulatory action on tobacco taxation, which has historically been associated with pressure on volumes and share price volatility. At the same time, multiple notes emphasise the earnings cushion from ITC’s diversified presence across FMCG, hotels, paperboards, and agri-business. Visible Alpha consensus revisions referenced in the estimates also signal that the market is re-rating the forward trajectory beyond the immediate quarter, with revenue, operating income, and EPS expectations being cut after the tax announcement.

Conclusion: focus on cigarettes metrics and management commentary

ITC’s Q4FY26 is expected to show low single-digit revenue growth, but with profitability under pressure due to higher cigarette taxes and potentially limited near-term pricing. The most watched disclosures will be cigarette volume trends post-February 1, margin movement in the cigarette business, and the consolidated EBITDA trajectory versus expectations. Investors will also track management’s stance on calibrated pricing and any commentary on illicit trade risks. With several brokerages not expecting another immediate tax hike in Budget 2026, the next set of signals may come from ITC’s outlook on FY27 volumes and margins once the new tax regime fully flows through.