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MUMBAI: India's top tobacco firm, ITC Ltd. on Friday posted a better-than-expected 20 per cent rise in quarterly profit on higher cigarette prices and...

MUMBAI: India's top tobacco firm, ITC Ltd. on Friday posted a better-than-expected 20 per cent rise in quarterly profit on higher cigarette prices and robust growth in its packaged foods and hotels businesses.

Its shares were down 0.8 per cent in a weaker Mumbai market that fell 2 percent. ITC, 31.7 per cent owned by British American Tobacco Plc, has entered personal care, appparel, retail and snack foods recently, but cigarettes make up two-thirds of revenues. The Kolkata-based company said net profit rose to 7.83 billion rupees ($193 million) in the fiscal first quarter to end-June from 6.52 billion a year earlier. Net sales rose 17 per cent to 33.25 billion rupees. That beat a Reuters poll forecast of a net profit of 7.10 billion on net sales of 33.18 billion rupees.

ITC's consumer goods business grew 13 per cent, but higher prices of raw-materials like wheat and milk could weigh on margins of its biscuits, salty snacks and ready-to-eat foods. Revenue for its 16 owned and licensed hotels grew 11 percent. Its full-year profit is forecast to rise 8 per cent to 29.55 billion rupees, according to estimates.

A value-added tax of 12.5 per cent was imposed on cigarette sales from April, and ITC has said it was concerned the taxation and tight regulatory framework in India can affect revenues. India's health ministry had planned to start displaying graphic pictorial warnings on cigarette packs to dissuade smokers, but that plan has been delayed because of political opposition.

ITC has said it was ready to comply. Shares in ITC were down 0.8 per cent at 165.25 rupees at 0520 GMT, mirroring a weaker Mumbai market down 1.9 per cent. ITC shares trade at 19.6 times forecast earnings, compared to 24.9 times for leader Hindustan Unilever Ltd.

HLL, which is forecast to report on Sunday a 14 per cent rise in quarterly net profit to 4.36 billion rupees. Shares in ITC, valued at $15.6 billion, gained 3 per cent in the quarter, trailing a 12 per cent rise in the main index and a 5 per ent gain in the sector index.