July 2026:Tax Hike Weighs on Godfrey Phillips as Q1 Profit Drops 44%
Godfrey Phillips India Ltd, the manufacturer of Marlboro and Four Square in India, reported a 44.3% year-on-year decline in consolidated net profit for the first quarter of FY2026–27 (ended June 30), as the steep tax hike on tobacco products severely squeezed operating margins. According to financial statements filed, the company posted a net profit of ₹198.39 crore ($23.7 million), down from ₹356.28 crore in the corresponding period of the previous fiscal year.
At first glance, Godfrey Phillips’ reported gross revenue from operations appeared to more than double, rising 110.6% year-on-year to ₹3,819.56 crore. However, this surge was primarily driven by gross accounting of higher excise duty collected on behalf of the government. Following updated central tax norms that took effect on February 1, 2026 – which raised the excise duty on manufactured tobacco products from 25% to 40% and up to 325% on certain smoking mixtures – the company’s excise duty expense soared nearly eightfold (700%) to ₹2,614.05 crore, compared to ₹327.06 crore in Q1 FY26.
Excluding excise duty, net revenue fell 18.8% year-on-year to ₹1,206 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped 46.2% to ₹182 crore, while EBITDA margins on net revenue narrowed sharply by 760 basis points to 15.1%, down from 22.7% a year earlier.
The quarterly earnings offer key insights into the current state of India’s cigarette and tobacco industry:
– Inability to Fully Pass on Taxes: Following the February tax increase, Indian cigarette manufacturers implemented price hikes to offset higher duties. While these price increases helped protect revenue, they were insufficient to fully recover the dramatic jump in tax expenses during the quarter.
– Resilient Consumer Demand: Despite higher retail prices, domestic cigarette consumption showed relative resilience. Godfrey Phillips’ domestic volumes dipped by only 2% to 3% year-on-year (averaging ~1.87 billion sticks per month). The modest volume decline underscores the inelastic nature of tobacco demand in India, even as higher tax payments limited profitability.
Investors reacted sharply to the news. Godfrey Phillips shares tumbled as much as 8% on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) during the trading session following the announcement, as market participants recalibrated expectations around near-term margin recovery in India’s highly regulated tobacco sector.
August 2025: Godfrey Phillips reports strong Q1 2026 results
Godfrey Phillips (India) reported +33.6% increase in core revenue and +30.6% increase in operating profit in Q1 2026. Quarterly cigarette shipment volume is up +27% from 4.5Bn in Q1 2025 to 5.7Bn in Q1 2026. GPI continued to gain market share and challenge ITC’s market dominance, particularly in southern India, where it expands with the Marlboro brand.
Following strong Q1 2026 results, GPI shares surged to a new all-time high (₹10,861.5), extending its YTD gains to 116%. Reaching $6.4Bn mcap, Godfrey Phillips becames the 9th largest tobacco (nicotine) company in the world. With $59Bn market cap, ITC is the 4th largest.
Company Profile: Godfrey Phillips India
Godfrey Phillips India (GPI) Limited, a flagship company of Modi Enterprises (KK Modi Group), is one of the largest FMCG companies in India. GPI owns cigarette brands, including Four Square, Red & White, Cavanders, Stellar, Focus, Originals International and others. GPI also manufactures and distributes Marlboro in India under a licensing agreement with Philip Morris International (PMI). Alongside the cigarette and tobacco portfolio, GPI is also active in the confectionery sector with the Funda brand. PMI owns a 25.1% stake in GPI. Corporate website: www.godfreyphillips.co.in
