Top Indian Companies: Tata Consumer Products

Tata Consumer Products is a fast-moving consumer goods company headquartered in Kolkata, and a part of the Tata Group. It is the world's second-largest manufacturer and distributor of tea and a major producer of coffee. Tata Consumer is a Nifty 50 company with a weightage of 0.59% on the index.

Formerly known as Tata Global Beverages Limited (TGBL), Tata Consumer Products was formed when the consumer products business of Tata Chemicals merged with Tata Global Beverages in February 2020. After the merger, the company controls Indian and international brands like Tata Salt, Tata Tea, Tetley, Eight O'Clock Coffee, Tata Sampann and Tata Starbucks.

As of 2020, the company's revenue stood at ₹5807.99 crore (US$810 million) while its net income stood at ₹575.35 crore (US$81 million).

In the 1990s, Tata Tea decided to take its brands into the global markets. It formed an export joint venture with Britain's Tetley Tea in 1992. The company had 74 tea gardens and was producing 6.2 crore kilograms of tea a year, two-thirds of it packaged and branded.

An important step for Tata Tea was the acquisition of the Tetley Group (based in United Kingdom) in 2000. It was a £271 million ($432 million) leveraged buyout.

Shareholding Pattern

The Shareholding Pattern page of Tata Consumer Products Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc.

Holder's Name No of Shares % Share Holding

No of Shares 921551715 100%

Promoters 319629733 34.68%

Foreign Institutions 236374487 25.65%

Banks/Mutual Funds 64629009 7.01%

Central Govt 87870 0.01%

Others 42380243 4.6%

General Public 198803937 21.57%

Financial Institutions 58782026 6.38%

GDR 864410 0.09%

FY2023 Q4 and Full Year Result

Tata Consumer on Tuesday reported a 21.12 per cent rise in its consolidated net profit at Rs 289.56 crore in the fourth quarter ended on March 31, 2023, led by a mixed growth from volume and price in India business.

The company had posted a net profit of Rs 239.05 crore in the January-March quarter a year ago, said TCPL, earlier known as Tata Global Beverages Ltd, in a BSE filing.

Its revenue from operations was up 13.96 per cent to Rs 3,618.73 crore during the quarter under review as against Rs 3,175.41 crore in the corresponding period of the preceding fiscal.

"It was a very strong quarter with a significant improvement in the growth trends from the earlier quarter," TCPL CFO L Krishnakumar told PTI.

The growth was led by the India business, which was up 15 per cent, which included every component of the business, including tea, coffee, and food and its growth portfolio, which consists of its business under Sampann, Soulfull and water, he added.

Total expenses of the Tata Group FMCG arm were at Rs 3,217.58 crore, up 14.11 per cent in Q4/FY 2022-23, as against Rs 2,819.60 crore of the corresponding period.

"For the quarter, revenue from operations increased by 14 per cent as compared to the corresponding quarter of the previous year, mainly driven by underlying growth of 15 per cent in India business, 6 per cent in international business, and 9 per cent in non-branded business," said TCPL in its earnings statement.

According to Krishnakumar, commodity inflation continues to be high. Tea prices have come down a bit but coffee and salt prices continue to be high, he added.

"It (commodity inflation) has come down a bit but we have also taken a price increase in the quarter and there are some recovery in volume. This year's EBITDA margins were similar to the last year," he said, adding, "Compared to earlier quarters, when the growth was entirely pricing led, this quarter we see a fair amount of volume growth in addition to price growth, especially in the Indian market."

In the March quarter, TCPL's overall branded business was up 13.59 per cent to Rs 3,230.54 crore. It was Rs 2,843.85 crore in the corresponding quarter last fiscal.

TCPL's branded businesses include tea, coffee, water and other various value-added business.

Its revenue from the Indian market in the branded business was at Rs 2,246.49 crore, up 14.98 per cent. It was 1,953.66 crore in Q4/FY22.

"For the quarter, the India packaged beverages business delivered 1 per cent revenue growth and 3 per cent volume growth, recording a sequential recovery," it said.

In tea premiumisation continued and the premium tea portfolio performed better than the mass economy segment. While its coffee continued strong performance with a revenue growth of 31 per cent year on year.

"For the quarter, the India foods business delivered 26 per cent revenue growth and 8 per cent volume growth, bringing to close a strong year for the foods business when revenue grew 26 per cent," it added.

TCPL's food brand Tata Sampann "recorded double-digit revenue growth for the quarter and also for the year. The growth was led by broad-based performance across categories", it said.

TCPL's international business contributed Rs 984.05 crore in the branded business, up 10.54 per cent from the corresponding quarter.

Revenue from the non-branded business of TCPL, which mainly consists of the plantation and extraction business of tea, coffee and other produce, was at Rs 385.27 crore, up 11.78 per cent. It was Rs 344.64 crore in the January-March quarter of FY22.

TCPL Managing Director & CEO Sunil D'Souza said: "During the quarter, we saw early signs of green shoots in our branded tea business, with the interventions we put in place starting to yield positive results."

"In our other core business of salt, we continued to execute strongly and have gained market share despite pricing actions taken to mitigate inflation," he added.

TCPL's revenue from alternate channels continued to grow in the March quarter.

"In FY23, the modern trade channel grew 21 per cent, contributing to 14 per cent of India business sales," said TCPL, adding, "the e-commerce channel grew 32 per cent contributing to 9 per cent of India business sales."

Notably, 10 per cent of e-commerce revenue came from its NPD (New Product Development) during the year, it added.

Tata Starbucks, a 50:50 joint venture between Tata Consumer Products Ltd and Starbucks Corporation, also recorded "strong revenue growth" of 48 per cent during the quarter. In FY23 Tata Starbucks's revenue growth was 71 per cent, albeit on a base that was impacted by the Covid pandemic.

"This was a landmark year for the business, as it reached 4-digit in top-line. It opened 71 new stores during the year and entered 15 new cities -- the highest ever annual store addition," said TCPL, adding that the total number of stores count has gone to 333 across 41 cities.

For the fiscal year ended March 2023, TCPL's consolidated net profit was up 30.04 per cent at Rs 1,320.14 crore. It had reported a net profit of Rs 1,015.16 crore for 2021-22.

Its revenue from operation stood at Rs 13,783.16 crore in 2022-23. This was 10.92 per cent higher than Rs 12,425.37 crore recorded in the year-ago period.

In a separate filing, TCPL said its board in a meeting on Tuesday recommended a final dividend of Rs 8.45 per equity share of Re 1 each for the financial year 2022-23.

Shares of Tata Consumer Products Ltd on Tuesday settled at Rs 734.30 on BSE, up 0.25 per cent from the previous close.

Brokerage Outlook

Brokerage, Phillip Capital initiate coverage on TCPL with a target of Rs 850 (50x FY24 EPS). Its operating margin should rise (EBITDA CAGR of 16% over FY21-24) as the troika of price hikes, moderation in inflation of RM index, and cost efficiencies program, should negate the adverse impact of higher freight-fuel costs to a large extent.

Brokerage expect EBITDA margin to improve c.190bps to 15.2% in FY24 from 13.3% in FY21 because of improved sales mix, premiumization, focus on cost efficiencies, and benefits related to distribution integration.

ESG

The company’s climate change strategy reallocates resources from high-carbon activities to low carbon ones such as energy efficiency, emissions reduction and renewable energy.

The company took several Green House Gas (GHG) emission reduction initiatives including investments in renewable energy and energy efficiency. The company has been able to bring down its carbon footprint by 26% between 2010-20.

Tata Consumer have put into practice several measures aimed at encouraging green energy sources, enhancing efficiency of existing machinery and processes, reducing the amount of energy we use,