India’s tobacco giant ITC Ltd, on Friday posted a 20 per cent rise in quarterly profit at Rs 783 crores on the back of higher cigarette prices and robust growth in its packaged foods and hotels business. 

The gross turnover of the year grew by 20.2 per cent to Rs 195.05 billion while the net turnover was Rs 123.69 billion, the ITC Chairman Y C Deveswar told at the 96th AGM.

A value-added tax of 12.5 per cent imposed on cigarettes from April this year pushed up prices, Mr Deveswar pointed out, forcing the company to scale up cigarette prices by about 20 per cent.

The tobacco major where 31.7 per cent is currently owned by British American Tobacco Plc, has entered personal care, apparel, retail and snack recently, but cigarettes make up two-thirds of its revenues. ITC’s consumer goods business grew 13 per cent, but higher prices of raw-materials weigh on margins of its biscuits, salty snacks and ready-to-eat foods. Revenue for its hotels grew 11 per cent.

Concerns
Addressing the shareholders here, Mr Deveswar expressed concern over the taxation and tight regulatory framework in the country and indicated that it might affect revenues in future.

Responding to queries raised by several shareholders on why the company’s shares were so lacklustre in the stock exchanges of late, he argued that high taxes on cigarettes has severely affected  ITC, while other tobacco manufacturers have got away with it.

Repeated attempts by ITC to take up the issue with the government yielded little result. However, with the imposition of value added tax, there is likely to be a level playing field with other tobacco products manufacturers.