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Equity Research INDIA June 16, 2020 BSE Sensex: 33229 Tata Consumer Products ADD ICICI Securities Limited Maintain is the author and Annual Report Analysis Rs371 distributor of this report Story through key words = ‘The platform for better’, Regional, Digital transformation, Direct delivery to consumers and Change in consumer habits. Company Update We like TCPL’s strategy to (1) focus on regional launches to gain market shares as consumer preferences change in different states, (2) leverage Tata Sampann Consumer Staples & brand to launch food products such as nutrimixes/ chilla mix, poha, and pulses Discretionary based snacks and (3) invest in digital transformation from sourcing to distribution, (4) keep closer connect with consumers as the habits/ buying pattern Target price Rs415 are likely to change and (5) enable direct delivery of products through delivery providers and e-commerce partners. We stay believers; retain ADD rating with Earnings revision (%) FY21E FY22E SoTP based target price of Rs415. Sustained improvement in return ratios (EVA Revenues 0.0 0.0 positive) is integral for long-term value creation. EBITDA 0.0 0.0 ‘The platform for better’ strategy: The annual report speaks about ’The platform PAT ↓ 2.6 ↑ 2.1 for better’ strategy. The company wants to push boundaries in all business activities to improve product quality, productivity and contribution to the people and planet. Change in spotlight from National to Regional: TCPL came out with campaigns Shareholding pattern targeting each state separately in FY20. It changed the product packaging as well as Sep Dec Mar method of communication to connect with regional consumers. Key states targeted ‘19 ‘19 ‘20 Promoters 34.5 34.5 34.7 under this strategy were UP, Delhi, Punjab and Haryana. It also acquired regional Institutional brands (Kala Ghoda and Lal Ghoda) in Rajasthan. investors 40.6 40.9 38.9 MFs and others 10.7 12.2 14.9 Plans to launch food products under Tata Sampann brand: TCPL did multiple Banks/FIs 0.3 0.1 0.1 Insurance 1.8 2.4 6.1 pilots during FY20 in Foods category such as Nutrimixes/ Chilla mix, poha, pulse FIIs 27.8 26.2 17.8 based snacks, low sugar Tata Nx. It plans to do limited launch in select channels or Others 24.9 24.6 26.4 select geographies to gauge customer acceptance before national rollout. Source: BSE Possibility of lower sales in H1FY21 due to up-stoking in Q4FY20: Even the Price chart categories which are declining structurally (e.g. black tea in UK) also reported higher 450 volume growth. TCPL expects some slowdown in H1FY21 with easing of lockdown. 400 Takeaways from Mr. Sunil D’Souza, MD & CEO’s Q&A: (1) TCPL is strengthening 350 300 its capability in digital transformation for commodity buying, enabling the entire (Rs) 250 supply chain from demand planning to procurement and sales, (2) It has tied up with 200 delivery providers and e-commerce partners to enable direct delivery to consumers 150 100 and (3) There are many changes in consumer beliefs, habits and buying patterns. As consumer adapts to a new normal, some of the changes will stick. The key is to keep close to the consumer and quickly adapt to changes. Jun-19 Jun-17 Jun-18 Jun-20 Dec-18 Dec-19 Dec-17 Acquisition-led revenue growth: TCPL reported strong revenue growth of 32.9% in FY20, largely driven by acquisition of consumer products portfolio of Tata Chemicals. India beverages reported revenue growth of 6.6%. International beverages reported revenue decline of 0.4%. Revenues of non-branded business were up 15.7%. Tata Starbucks (JV) reported revenue growth of 21%. Market Cap Rs339bn/US$4.5bn Year to March FY19 FY20 FY21E FY22E Bloomberg TATACONS IN Revenue (Rs mn) 72,515 96,374 98,694 108,913 Shares Outstanding (mn) 916.2 Adj. Net Profit (Rs mn) 4,382 6,870 7,034 8,527 Research Analysts: 52-week Range (Rs) 397/199 Dil. Rec. EPS (Rs) 6.9 7.5 7.6 9.3 Manoj Menon Free Float (%) 65.3 % Chg YoY (5.5) 7.4 2.4 21.2 [email protected] FII (%) 17.8 P/E (x) 53.4 49.8 48.6 40.1 +91 22 6637 7209 Aniruddha Joshi Daily Volume (US$'000) 27,230 CEPS (Rs) 8.9 10.1 10.4 12.2 [email protected] Absolute Return 3m (%) 14.1 EV/EBITDA (x) 29.0 25.7 25.0 22.4 +91 22 6637 7249 Absolute Return 12m (%) 49.8 Dividend Yield (%) 0.7 0.7 0.9 1.0 Vismaya Agarwal, CFA Sensex Return 3m (%) (2.3) RoCE (%) 7.0 7.9 5.4 5.3 [email protected] +91 22 2277 7632 Sensex Return 12m (%) (14.9) RoE (%) 6.1 6.5 4.2 4.2 Please refer to important disclosures at the end of this report Tata Consumer Products, June 16, 2020 ICICI Securities EBITDA margins expanded despite gross margin decline: The gross margins declined 80bps in FY20 due to higher input prices and adverse revenue mix. However, the EBITDA margin improved 257bps in FY20 due to lower staff cost as % of net sales (194bps) and lower ad-spend as % of net sales (60bps). Improvement in net working capital days: The net working capital days declined from 101 in FY19 to 87 in FY20. The improvement is largely attributable to reduction in inventory days. We believe the acquisition of foods business resulted in lower inventory days. Core RoCE improves in FY20: The core RoCE has improved to 14.9% in FY20 from 12.9% in FY19 due to better profit margins. Core RoCE is calculated as EBIT / (Capital employed – Goodwill – Investments). Strong FCF generation in FY20: The FCF generation was strong at Rs8.3bn in FY20 (vs Rs(825)mn in FY19). While the OCF has increased due to acquisition of consumer business of Tata Chemicals, the stock acquisition route has not impacted the capex. TCPL continues to be net cash in FY20 (~Rs10/share). Maintain ADD: We model TCPL to report revenue and PAT CAGR of 6.3% and 11.4%, respectively over FY20-22E. We value the stock on SoTP basis with unchanged target price of Rs415. Key downside risk is lower-than-expected integration synergies. 2 Tata Consumer Products, June 16, 2020 ICICI Securities FY20 – Annual report highlights ‘The platform for better’ strategy The company’s annual report speaks about ‘The platform for better’. We note the company’s strategy is to focus on doing better in everything it does. It wants to do better in products and services, contribution towards people, the planet and productivity across workspace. Chart 1: ‘The platform for better’ strategy Source: Company, I-Sec research Highlights regarding key brands Tata Tea: Tata Tea is market leader by volume (~19.7%) and second largest player in value terms (20%) in India. It is the fastest growing tea brand in modern trade. The company changed the spotlight from national to regional and came out with campaigns targeting each state separately. It changed from product packaging to method of communication to connect with regional consumers. Key states targeted under this strategy were UP, Delhi, Punjab and Haryana. The spice based tea brands (Tata Tea Elaichi and Masala) have crossed revenues of Rs2bn in FY20. The company launched Tata Tea Tulsi Green in Q2FY20 in Delhi and plans to roll out it nationally in FY21. TCPL has rolled out seven stores of Tata Cha in Bengaluru. The company was forced to delay opening of four stores due to lockdown. Tetley: Global tea industry is ~US$45bn and black tea is the biggest segment. However, black tea segment continues to decline and non-black tea (Green, Decaf, 3 Tata Consumer Products, June 16, 2020 ICICI Securities Specialty, Cold infusions, Fruit and Herbal) segment is growing faster. Health and Wellness is key focus area of the industry. Tetley Super Teas and Tetley Cold Infusions also target the Health and Wellness segment. Due to fears of coronavirus pandemic, there was up-stocking by consumers which led to higher growth in FY20. However, the growth rates are expected to decline in coming weeks due to lifting of the lockdown. The company introduced new campaign ‘Now We’re Talking’ for Tetley Tea in UK. The company also introduced Indian flavour tea targeting South Asian diaspora. It introduced these tea variants under its flagship brand Tata Tea. TCPL introduced multiple non-black tea variants in Canada and now its market share has reached 3.9% in non-black tea market in Canada. TCPL also introduced Tetley tea in three different variants in USA as Masala, Elaichi and Ginger. Eight O’clock: The coffee market is slowing down in USA and there is growth only in (1) premium/ food service brands such as Starbucks, (2) small niche brands and (3) private labels. The company introduced Barista Blend and Flavors of America variants in FY20. Tata Salt: Tata Salt is market leader with 30% share of the entire salt category in India. Tata Chemicals expanded salt manufacturing capacity from 1 million tonnes to 1.2 million tonnes in FY20 and it is expected to provide support to TCPL’s growth plans in salt business. Tata salt launched campaign ‘Sawal kijiye apne namakse’. It was aimed at educating consumers about quality of salt. There is growing health awareness among consumers and they are selecting better-for-you options. (E.g.- lower sodium content in Tata Salt Lite, Iron and Iodine fortification in Tata Salt Plus). Specialty salts (Rock salt and Black salt) have gained market shares in modern trade in FY20.
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    .,.. TATA July 17, 2018 The Secretary BSE Ltd. The Secretary National Stock Exchange Corporate Relationship Calcutta Stock of India Ltd. Dept. 1st Floor, New Exchange Asscn. Ltd. Exchange Plaza.5th floor Plot Trading Wing Rotunda 7 Lyons Range No. C/1, G Block Sandra Kurla Building, PJ Towers Kolkata 700 001 Complex Sandra (E) Dalal Street Scrip Code- Mumbai 400 051 Mumbai 400 001 10000027 (Demat) Scrip Code - TATAGLOBAL Scrip Code- 500800 27 (Physical) Dear Sirs, Sub: Annual Report 2017-18 Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements), 2015, we are attaching a copy of Annual Report for the Financial Year 2017-18. We request you to kindly take the above on record . Thanking You, Encl.: as above TATA GLOBAL BEVERAGES LIMITED Kirloskar Business Park Block-( 3rd & 4th Floor Hebbal Bengaluru-560 024 Tel 91-80·67171200 Fax 91-80 6717 1201 Registered Office 1 Bishop lefroy Road Kolkata 700 020 Corporate Identity Number (CIN) - L1 5491 W81962PLC03142S E-mail id - [email protected] Website addren - www.tataglobalbeverages.com Annual Report 2017-18 TATA TEA 1868, A SPECIALLY CURATED RANGE OF TEAS, TO CELEBRATE 150 YEARS OF TATA GROUP, DEBUTED AT WORLD ECONOMIC FORUM 2018, DAVOS MILESTONE MOMENTS TETLEY CELEBRATES 180 YEARS TATA STARBUCKS OPENS 100TH STORE IN INDIA HIMALAYAN SPARKLING ELEVATES THE FINE-DINE EXPERIENCE JAAGO RE 2.0 SUBMITS 1.8 MILLION PETITIONS TO HRD MINISTER ON WOMEN’S SAFETY AND SPORTS CULTURE Corporate Information BOARD OF DIRECTORS Committee for Special Projects N. Chandrasekaran (w.e.f. July 3, 2017) (Chairman) V. Leeladhar (Chairman) Mallika Srinivasan (Mrs.) Ranjana Kumar (Mrs.) V.
  • Chapter-I Introduction

    Chapter-I Introduction

    CHAPTER-I INTRODUCTION 1 INTRODUCTION Tata Group Type Private Industry Conglomerate Founded 1868 Founder(s) Jamsetji Tata Bombay,house Headquarters Mumbai, India Area served Worldwide RatanTata Key people (Chairman) Steel Automobiles Telecommunications Products Software Hotels Consumer goods 2 Revenue 319,534 crore (US$69.34 billion) Profit 8,240 crore (US$1.79 billion) Total assets US$ 52.8 billion (2009-10) Employees 396,517 (2009-10) TataSteel TataSteelEurope TataMotors TataConsultancyServices TataTechnologies TataTea Subsidiaries TitanIndustries TataPower TataCommunications TataTeleservices TataAutoCompSystemsLimited Taj Hotels Website Tata.com Tata Group Companies CMC · Tata BP Solar · Tata Coffee · Tata Chemicals · Tata Consultancy Services · Tata Elxsi · Tata Interactive Systems · Tata Motors · Tata Steel · Tata Power · Tata India-basedTea · Tata Communications · Tata Technologies Limited · Tata Teleservices · Titan Industries · Tata Voltas · The Indian Hotels Company · Trent (Westside) · Cromā 3 Brunner Mond · Jaguar Land Rover (Jaguar Cars · Land Other Rover) · Tata Daewoo Commercial Vehicle · Tata Steel Europe · Tetley · VSNL International Canada Ginger · Good Earth Teas · Tanishq · Taj Hotels · I-shakti · Tata Salt · Brands Tata Sky · Tata Indicom · Tata DoCoMo · Titan · Westside · Voltas · Virgin Mobile India Notable Jamsetji Tata · Ratanji Dadabhoy · Dorabji Tata · Nowroji People Saklatwala · J. R. D. Tata · Ratan Tata · Pallonji Mistry Bombay House is the head office of Tata Group The Tata Group is an Indian multinational conglomerate company headquartered in the Bombay House in Mumbai, India. In terms of market capitalization and revenues, Tata Group is the largest private corporate group in India. It has interests in chemicals, steel, automobiles, information technology, communication, power, beverages, and hospitality. The Tata Group has operations in more than 80 countries across six continents and its companies export products and services to 80 nations.
  • Tata Chemicals Limited Annual Report 2011-2012

    Tata Chemicals Limited Annual Report 2011-2012

    (` in crores except per share data, EBITDA %, PAT %, Return on Invested Capital and Net Debt/EBITDA) Turnover* EBITDA and EBITDA %** CAGR : CAGR: Standalone - 9% 16000 Standalone =18% 2500 20% 19% Consol =23% 2,304 Consol - 20% 13,655 14000 18% 18% 18% 2,002 12,652 17% 2000 17% 1,864 12000 1,840 Standalone 16% 10,895 16% Consol 10000 16% 14% 9,449 1500 8,362 14% 13% 8000 7,913 Standalone 1,113 12% 1,052 980 EBITDA % 6,225 5,982 12% 899 Consol 1000 893 6000 5,412 Standalone 744 4000 4,036 10% EBITDA % 500 Consol 2000 8% 0 0 6% 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 PAT and PAT %@ Earning Per Share (EPS)@ and Dividend Per Share (DPS) 1200 28 50 12 45 43.51 24 42.82 1000 964 949 23% 40 11 Standalone EPS 838 20 35 32.88 800 Consol EPS 16% 30 27.59 653 26.10 25.61 648 16 23.03 DPS 606 600 587 Standalone 25 10 10 10 Consol 12 19.25 18.38 452 435 20 16.32 400 8% 408 PAT % 7% 8 Standalone 15 5% 6% 9 9 10 9 9 200 6% 6% 6% PAT% Consol 5% 4 5 0 0 0 8 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 Net Worth and Book Value (BV) per Share Net Debt#/EBITDA** 7000 300 4.00 3.67 6,418 3.50 6000 252 5,452 250 3.00 5,017 Standalone 2.72 4,770 4,741 5000 4,716 Consol 2.61 203 2.44 4,283 2.40 2.39 194 2.50 2.35 214 2.34 2.34 3,859 200 4000 3,718 197 BV per Share 3,572 Standalone 159 1.98 186 Standalone 2.00 176 Consol 3000 164 153 150 BV per Share 1.50 Consol 2000 1.00 100 1000 0.50 0.00 0 50 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 Return on Invested
  • The Tata Group and Starbucks Coffee Company Strengthen Global Partnership with Multiple New Commitments

    The Tata Group and Starbucks Coffee Company Strengthen Global Partnership with Multiple New Commitments

    The Tata group and Starbucks Coffee Company Strengthen Global Partnership with Multiple New Commitments Starbucks Reserve® Tata Nullore Estates is the first single-origin coffee from India available to customers in the U.S., joint-venture extends the reach of Starbucks coffee and expands coffee roasting capabilities Partnership also unveils joint investment in the Tata STRIVE skills development program MUMBAI and SEATTLE; (June 27, 2016) – In a meeting at the iconic Starbucks Reserve® Roastery and Tasting Room in Seattle, Washington, chairman and chief executive officer of Starbucks Coffee Company (NASDAQ: SBUX), Howard Schultz, and chairman, Tata Sons Limited, Cyrus Mistry, announced multiple new joint initiatives last week which expand the existing Tata and Starbucks relationship and strengthen the companies’ commitment to developing the Tata-Starbucks brand and building a different kind of company in India. For the first time, Starbucks will offer a single-origin coffee from India in the U.S., giving customers from outside the country a unique opportunity to experience a rare, small-lot coffee from the Tata Nullore Estates located in the beautiful Coorg coffee growing area of India. Starbucks Reserve® Tata Nullore Estates will be the first coffee from India to be roasted at the Starbucks Reserve® Roastery and Tasting Room and will only be available at this Seattle location later this year. “These announcements build upon the incredible success and shared values between Starbucks and Tata in our partnership in India,” said Schultz. “We are humbled by the way in which customers in India have embraced Starbucks elevated coffeehouse experience, which now spans to more than 80 stores across six cities.
  • Drafting of Joint Venture Agreements Kiran M

    Drafting of Joint Venture Agreements Kiran M

    drafting of joint venture agreements kiran m. chitale disclaimers: 1. contents of this presentation reflect my personal views. 2. any intellectual property referred here is owned by respective owners 1 back to basics • what is joint venture? • types of joint venture • why jv ? 2 why jv ? • co-branding of • combining each enterprises others strengths • technology • better financials • sharing risks in • best practices and business experience • larger market share • regulatory reasons • eliminating like sectoral caps competition 3 key considerations maintain highest transparency if you want one, ask for two voice your expectations and concerns be honest – concede to others’ views reason for a jv have a summary of key issues assess “give and take” identify the single contact point to represent make a list of critical dates 4 jv process swot-analysis of the partners identification of area of business finding a suitable partner defining the purpose for the jv conducting initial discussions feasibility study and market survey preparing a draft business plan drafting mou 5 …jv process defining a schedule of action points drafting of joint venture agreement (jva) drafting of other related agreements/ documents initiate process for jvc incorporation nominating directors on the board drafting of memorandum and articles and other documents 6 mou/ term sheet introduction of the parties confidentiality objective of joint venture products and services to be offered by jvc basic terms of joint venture modes of funding,
  • Conglomerates: the New Trend of Expansions

    Conglomerates: the New Trend of Expansions

    Original Research Article http://doi.org/ 10.18231/j.jmra.2020.029 Conglomerates: The new trend of expansions Ashok Panigrahi1*, Parth Mansinghka2, Piyush Gupta3 1Associate Professor, 2,3Student, 1Dept. of Technology Management, 1,2SVKM's Narsee Monjee Institute of Management Studies, Shirpur, Maharashtra, India, 3Institute of Cost Accountants of India *Corresponding Author: Ashok Panigrahi Email: [email protected] Abstract The goal for making this paper on conglomerates is to introduce the rising trend of conglomerates in big companies. This paper shall introduce what might be the reasons for Conglomerates, and their increasing trends. What are the benefits that companies enjoy being a conglomerate and what might be the disadvantages for it too? Further, the conglomerates are classified in two types, which are also explained with examples. Then we have taken examples of many companies to explain details about conglomeration. At the end there is a case study on Facebook, about how it acquired some companies and what the effects on both companies actually were, in terms of growth and benefit. Keywords: Conglomerate, Market share, MNC, Facebook, Expansion, Diversification. Introduction and holds two companies (for example companies A and B), A Conglomerate company is generally a very large and a even if company A goes in loss, there is still a chance to MNC, which consists of multiple business entities or recover losses by making profits by the B company. companies itself, which might be acquired by the parent company or might be just a subsidiary of the parent company. Capturing maximum possible market share The companies don’t start as conglomerates, they are just This is done by some companies so as to boost the profits in standalone companies at the start, i.e.
  • Cutting Noise out of Data Is the Biggest Challenge Today

    Cutting Noise out of Data Is the Biggest Challenge Today

    October 16-31, 2019 Volume 8, Issue 8 `100 CUTTING NOISE OUT OF DATA IS THE BIGGEST CHALLENGE TODAY INTERVI EW GAURAV JEET SINGH General Manager - Media, South Asia, Unilever 12 8 10 16 PLUS APURVA PUROHIT For all the Lady Bosses 10 TATA SALT In Gandhi’s Footsteps 15 MOST-VIEWED ADS Best Creatives 21 RITESH SIDHWANI POND’S OPPO The Smile Says it all Reveal Your Festive Glow A Deeper Connect MOVEMENTS/APPOINTMENTS Excel Entertainment is looking The latest ad urges people to How to operate in a beyond films and originals. express themselves freely. fragmented Indian Landscape Who’s Where 22 EDITORIAL This fortnight... Volume 8, Issue 8 here is an English expression, ‘Too much of a good thing.’ If you want a great place in which to use that turn of phrase, consider data. EDITOR T Sreekant Khandekar October 16-31, 2019 Volume 8, Issue 8 `100 Marketers, publishers and pretty much everybody else is inundated with data. PUBLISHER CUTTING Because technology allows us to capture it, data must be stored. And because it is Sreekant Khandekar NOISE OUT OF DATA stored it must be analysed, often to death. And that’s where the fun begins. EXECUTIVE EDITOR IS THE BIGGEST You will find this fortnight’s cover story interview with Gaurav Jeet Singh, Ashwini Gangal CHALLENGE TODAY Unilever’s boss man for media for all of South Asia, insightful. He talks candidly PRODUCTION EXECUTIVE Andrias Kisku of the paradox of having far too much data in digital vs just enough of it in ADVERTISING ENQUIRIES INTERVI EW traditional media like TV and print.
  • Starbucks in India Pradeep Gopalakrishna, Pace University

    Starbucks in India Pradeep Gopalakrishna, Pace University

    Starbucks in India Pradeep Gopalakrishna, Pace University Rajeshwari Victor, Chennai Business School David Fleischmann, Pace University This case was prepared by the authors and is intended to be used as a basis for class discussion. The views represented here are those of the authors and do not necessarily reflect the views of the Society for Case Research. The views are based on professional judgment. Copyright © 2015 by the Society for Case Research and the authors. No part of this work may be reproduced or used in any form or by any means without the written permission of the Society for Case Research. Introduction Howard Schultz looked over the financial data. Starbucks generally preferred a strategy of premium prices, using a menu and store layout somewhat modified for local tastes. This strategy had been working well in India. However, local and foreign specialty coffee retailers were proving increasingly formidable competitors. India’s larger cities were becoming saturated. Many competitors had now turned their attention to expanding into smaller cities. India was a large, but complex market, fragmented along age, geographic, income, and demographic lines. Continued success was not certain. It was not yet clear how Starbucks should best adapt. Starbucks’ History In 1971, English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker, opened the original Starbucks Coffee, Tea and Spice, in Pike Place Market in Seattle (Strickland, 1999). The store began by selling scoops of freshly roasted coffee beans. The founders named their store after Starbuck, a ship captain in Herman Melville’s Moby Dick novel who drank a lot of coffee.