ITC (NSE: ITC) is betting its post-cigarette future on digital-first brands and premium FMCG, with Yoga Bar, Prasuma and Mother Sparsh posting 70% year-on-year growth to cross a ₹1,800 crore combined annual revenue run rate, cushioning the impact of rising cigarette taxes on the company’s September-quarter results.
This pivot matters now because sharp increases in cigarette taxation continue to weigh on volumes and profitability in the legacy tobacco business, making the diversified non-cigarette portfolio the critical engine for sustaining long-term growth. The stock gained 5.1% across two trading sessions since the company reported its September-quarter results on Monday evening.
Three Metrics Defining ITC’s Diversification Bet
- Digital-first brands such as Yoga Bar, Prasuma and Mother Sparsh kept up strong momentum, achieving 70% year-on-year growth and exceeding a combined annual revenue run rate of over ₹1,800 crore.
- The FMCG-others segment delivered its highest growth in 14 quarters, with margins expanding by more than 50 basis points both year-on-year and sequentially despite inflationary pressures.
- With a trailing price-to-earnings multiple of approximately 18.2, the stock trades below its five-year average of 26, and Religare Broking continues to hold a ‘buy’ rating with a ₹408 target price, which represents a 46% potential gain from Wednesday’s closing price of ₹279.7.
Digital Brands Cross ₹1,800 Crore Run Rate With 70% Growth
The numbers show this. The combined annual revenue run rate for ITC’s digital-first portfolio—comprising Yoga Bar, Prasuma and Mother Sparsh—has surpassed ₹1,800 crore following 70% year-on-year growth in the September quarter. The company’s growth in digital-first brands helps compensate for slow sales in its traditional cigarette business.
But the balance sheet tells a different story about the legacy segment. Cigarette taxation, commodity inflation and geopolitical uncertainties remain key risks, with the September-quarter performance highlighting how a sharp increase in taxes continued to weigh on cigarette volumes and profitability. The digital brands’ growth helped cushion this impact, demonstrating the strategic value of ITC’s push into direct-to-consumer categories alongside premiumisation and distribution expansion strategies.
ITC’s growth strategy now relies more on brands designed for online sales. Rather than relying solely on traditional retail distribution for its FMCG products, the company is building brands that thrive in digital channels, creating a new revenue stream that operates independently of the cigarette distribution network.
FMCG-Others Segment Posts Highest Growth in 14 Quarters
The FMCG division remained a major growth engine, as the FMCG-others segment recorded its strongest growth in 14 quarters. Strong demand across foods, biscuits, snacks, dairy, personal care, notebooks and home-care categories drove this performance, showing broad-based strength rather than reliance on a single product line.
Despite inflationary pressures, the segment’s margin grew by over 50 basis points both compared to the previous year and sequentially. This improvement was supported by an improved product mix, cost-management initiatives and calibrated pricing actions, showing that premiumisation is working even as input costs rise. The company’s ability to push premium products while managing costs has created a buffer against the commodity inflation affecting other parts of the business.
| Metric | Value | Context |
|---|---|---|
| Digital Brands YoY Growth | 70% | Yoga Bar, Prasuma, Mother Sparsh combined |
| Digital Brands Revenue Run Rate | ₹1,800 crore+ | Annualized combined revenue |
| FMCG-Others Growth Period | Highest in 14 quarters | September quarter performance |
| FMCG Margin Expansion | 50+ basis points | Both YoY and sequential |
| Trailing P/E Ratio | 18.2 | vs. five-year average of 26 |
| Analyst Target Upside | 46% | Target ₹408 vs. close ₹279.7 |
Stock Re-Rates on Diversification Hopes After Range-Bound Period
Following three months of trading within a narrow range, ITC (NSE: ITC) shares rose 5.1% over two trading sessions after the company released its September-quarter results on Monday evening. The stock closed Wednesday at ₹279.7, reflecting renewed investor confidence in the non-cigarette growth story.
Religare Broking keeps its ‘buy’ rating on the stock, setting a target price of ₹408 that suggests a 46% upside from Wednesday’s closing price of ₹279.7. The trailing price-to-earnings multiple of around 18.2 sits below the five-year average of 26, suggesting the market has not yet fully priced in the growth potential of the diversified portfolio. This valuation gap indicates room for further re-rating if the digital and FMCG segments continue their current trajectory.
Paper and Agri Businesses Add Further Support to Earnings
Beyond FMCG and digital brands, the paper business maintained strong momentum, driven by improved demand and the integration of Century Pulp & Paper. This integration has helped the paperboards business recover, adding another layer of diversification to ITC’s revenue base. Meanwhile, the agri business continued to benefit from growth in value-added products and exports, providing higher-margin contributions compared to commodity agri trading.
Analysts expect these businesses, together with the expansion of the fresh foods portfolio, to serve as major earnings growth drivers in the quarters ahead. The recovery in the paperboards business and higher contribution from fresh foods and value-added agri products are central to ITC’s strategy of reducing dependence on cigarettes, creating multiple engines of growth that can withstand pressure on any single segment.
Taxation Pressures Define the Remaining Risk Landscape
Despite the diversified growth, cigarette taxation remains the dominant headwind. The September-quarter performance highlighted how continued tax increases weigh on both volumes and profitability in the core business, making the pace of growth in the increasingly diversified portfolio crucial for sustaining long-term growth beyond traditional cigarettes.
Commodity inflation and geopolitical uncertainties add further complexity to the outlook. While premiumisation and distribution expansion offer pathways to margin protection, the company’s ability to maintain momentum in digital-first brands and premium FMCG will determine whether it can fully offset the structural decline in cigarette profitability. The 70% growth in digital brands and the 14-quarter high in FMCG suggest the strategy is gaining traction, but the tax burden on cigarettes continues to grow heavier each quarter.
The strongest signal from this reporting period is that ITC’s non-cigarette businesses are no longer peripheral—they are now the primary buffer against regulatory pressure on tobacco, with the ₹1,800 crore digital run rate and sustained FMCG expansion marking concrete milestones in that transition.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
