Can Marlboro Light Up Godfrey Phillips’ Profits Again After the Tax Increase?
The article outlines the weak performance and how the tobacco business can revive it for the company, which is one of India's largest fast-moving consumer goods (FMCG) companies and a flagship tobacco manufacturer under Modi Enterprises.
With a market capitalization of Rs 27,748 crore, Godfrey Phillips India Ltd’s share was last trading at Rs 1,779 per share, down by 4.7 percent from its previous close. The stock of the company gave a negative return of 47.5 percent over the last year .
Godfrey Phillips India is facing a sharp profitability hit after the increase in cigarette taxes, but its resilient cigarette volumes, strong Marlboro franchise and growing international tobacco business could provide some support to earnings recovery.
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Tax increase takes a toll on profitability
Godfrey Phillips reported a consolidated Gross Sales Value of Rs 5,676 crore in Q1 FY27, up 38.6 percent YoY. However, the sharp increase in taxes implemented in Q4 FY26 weighed heavily on its profitability.
Net profit fell 44.3 percent YoY to Rs 198 crore from Rs 356 crore in Q1 FY26, while EBITDA declined 46.2 percent YoY to Rs 182 crore from Rs 338 crore. Net revenue also fell 18.8 percent YoY to Rs 1,206 crore.
Management said the higher tax burden has affected industry profitability and also contributed to the growth of illicit trade. However, the company’s domestic cigarette volumes declined only 2 percent YoY in Q1 FY27, suggesting that its brands and distribution network have remained relatively resilient despite higher prices.
Can Marlboro help rebuild profits?
Despite the tax increase, Godfrey Phillips’ domestic cigarette volumes remained relatively resilient, declining only 2 percent YoY to 1,866 million per month in Q1 FY27 from 1,903 million in Q1 FY26. At the same time, unmanufactured tobacco exports stood at Rs 248 crore, contributing 7 percent of net sales, giving the company an additional growth avenue beyond its domestic cigarette business.
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Marlboro could be one of the important levers for Godfrey Phillips as it looks to recover from the tax shock. The company manufactures and distributes Marlboro in India under its arrangement with Philip Morris International, and CRISIL identifies the brand as a significant revenue driver with strong customer loyalty.
The broader cigarette business also has a sizeable base. Godfrey Phillips held around 19 percent of India’s cigarette market by volume, according to CRISIL, making it the second-largest player in the segment.
More importantly, the company is focusing on pricing and product mix optimisation to protect margins. If cigarette volumes remain resilient while the company gradually passes on higher costs through pricing and improves its product mix, Marlboro can support the recovery in profitability.
International tobacco adds another profit lever
Godfrey Phillips is not relying only on its domestic cigarette business. Its unmanufactured tobacco exports stood at Rs 248 crore in Q1 FY27 and contributed 7 percent of net sales.
The company is looking to expand this business by using its crop development expertise, product quality and customer relationships. Its broader International Business Division recorded Rs 264 crore of net sales in Q1 FY27 and has a presence across around 30 countries.
This gives the company another avenue to diversify its revenue base while the domestic cigarette industry adjusts to the higher tax burden. However, management also noted that unmanufactured tobacco exports were affected by geopolitical factors during the quarter.
Can profits recover from here?
There is a clear gap for Godfrey Phillips to recover. Net profit declined by Rs 158 crore YoY in Q1 FY27, while EBITDA fell by Rs 156 crore. The company therefore needs a combination of stable cigarette volumes, pricing, better product mix, and growth in international tobacco to rebuild earnings.
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The financial position provides some comfort. CRISIL reaffirmed its AA+ rating with a Stable outlook and A1+ short-term rating. The company had a cash surplus and investments of around Rs 2,383 crore as of March 31, 2026, with negligible debt.
However, the recovery is not without risks. Cigarettes remain highly exposed to tax and regulatory changes, while around 90 percent of Godfrey Phillips’ cigarette sales come from northern and western India. The company also faces intense competition from ITC and the risk of illicit trade increasing after higher taxation.
For now, Marlboro gives Godfrey Phillips a strong brand to lean on, but the real test will be whether the company can convert resilient cigarette volumes and pricing into a sustained improvement in margins and profits.