ITC’s net profit jumps by 36% to ₹4,023 crore on tax credit

• ITC re-measured its annual tax expenses after the government reduced the corporate tax rate.
  
• Its profits were boosted by a ₹166 crore tax credit for the quarter.
  
• Its revenues grew by a modest 6% for the quarter to ₹12,525 crore.
  

ITC’s second quarter net profit jumped by 36% to ₹4,023 crore from ₹2,954 crore in the same quarter last year, all thanks to a deferred tax credit worth ₹166 crore for the quarter.

Its revenues grew by a modest 6% for the quarter to ₹12,525 crore as compared to ₹11,776 crore in the same quarter last year.

The company remeasured its annual tax expenses after the government changed the corporate tax rate. “The resultant impact is being recognized over the current and the remaining quarters of the financial year. Consequently, the tax expense for the current quarter and six months ended September 30, 2019 includes a credit of ₹340 crore,” ITC said in a statement with the quarterly results announcement.

The company’s stock traded flat in anticipation the quarterly earnings report, as it went up by 0.8% in today’s trade.

ITC has set ambitious targets for itself to generate as much as ₹1 lakh crore in revenue from its FMCG business by 2030. Last financial year, its sales from cigarattes fell to 45.8% as its hotels and FMCG divisions performed well. Lowering tobacco sales is good news as steep increases in taxes by government has been hurting the business.

“Trading volumes in illegal cigarettes has affected such business. Thereby, now the consumer business i.e. the foods division, comprising of cookies, staples and snacks, now accounts for 21.3% of revenue, while agri-business generated 13.4% of ITC’s gross turn-over last fiscal,” said a report by Rudra shares in October.