Initiating Coverage August 13, 2013
Rating Matrix Rating : Buy Tata Global Beverages (TATTEA) Target : | 182 Target Period : 12-15 months | 146 Potential Upside : 25% Brewing it up the ‘star’ry way….
YoY Growth (%) Tata Global Beverages (TGBL) is the second largest branded tea player in (YoY Growth) FY13 FY14E FY15E FY16E the world and the market leader in the domestic tea market with its Net Sales 10.7 15.6 10.6 9.5 flagship brands, Tetley and Tata Tea, respectively. Apart from tea, TGBL’s EBITDA 23.3 22.6 12.7 11.8 increasing presence in the coffee and water businesses through Net Profit 4.7 28.6 14.5 13.1 acquisition of dominant brands (Eight O’ Clock Coffee, Grand Coffee, EPS (Rs) 16.1 21.8 14.5 13.1 Himalayan water) has transformed the tea company into a ‘good-for-you-
beverages’ company. Further, we believe TGBL’s JV with Starbucks Inc Valuation Summary US, to establish Starbucks stores across the country, and PepsiCo Ltd, to FY13 FY14E FY15E FY16E handle distribution of its water products, are key positives for revenue P/E (x) 24.2 18.8 16.5 14.5 and earnings growth, going ahead. Accordingly, we expect revenues, Target P/E 28.7 22.3 19.5 17.2 earnings (adjusted PAT) to grow at a higher CAGR (FY13-16E) of 12%, Mkt Cap/Sales (x) 1.2 1.1 1.0 0.9 15.7%, respectively. We initiate coverage on TGBL with a BUY rating. EV/EBITDA (x) 11.7 9.9 8.7 7.6 RoNW (%) 7.7 9.3 9.9 10.4 Brand strength in tea to drive revenues across geographies RoCE (%) 10.5 12.2 12.6 12.9 TGBL derives ~70% of its revenues (FY13) from tea. Tea revenues have grown at a healthy CAGR of 9.2% in FY08-13. The growth has been aided Stock Data by its leadership position in Canada (Tetley), India (22.2% value share of Market Capitalization | 9028.6 Crore Tata Tea), UK (27% value share of Tetley), acquisition of leading brands Total Debt (FY13) | 672.7 Crore across the globe, Good Earth in US (20.6% volume share), Joekels in Cash and Investments (FY13) | 693 Crore South Africa (third largest player), Jemca in Czech Republic (market EV | 9008.3 Crore leader) and Vitax in Poland (16% share of fruit tea market). Further, 52 week H/L 179 / 124 capitalising on Tetley’s brand strength TGBL has successfully ventured Equity capital | 61.8 Crore into Australia and the Middle East. Therefore, we believe with a strong Face value | 1 portfolio of tea brands across geographies, TGBL would continue to grow MF Holding (%) 18.5 its tea revenues at reasonable CAGR of 7.6% in FY13-16E. FII Holding (%) 17.9
Strengthening coffee business to aid earnings Comparative return matrix (%) The coffee business contributes 35.8% (6.1% in FY06) to PBIT and 26.2% Return % 1M 3M 6M 12M (4.3% in FY06) to revenues (FY13). The increasing contribution of the Tata Global Beverage 4.5 (1.7) (0.3) 12.6 business has aided PBIT margins as earnings from the coffee business are HUL 4.8 7.7 32.5 31.5 higher (15.2% in FY13) compared to tea (10.2% FY13). We expect coffee’s Nestle 4.9 10.0 14.7 23.1 contribution in revenues to increase to 29% by FY16E, consequently driving margins (PBIT) growth, going ahead. Price movement Earnings growth to gain traction, attractively valued 6,400 200 We expect TGBL’s earnings (adjusted PAT) to witness a higher CAGR of 6,000 150 15.7% in FY13-16E led by changing sales mix, premiumisation across the portfolio and Starbucks JV contributing positively to EBITDA from FY16E 5,600 100 onwards. We believe the stock is trading at an attractive P/E of 18.8x and 5,200 16.5x FY15E and FY16E EPS of | 8.9 and | 10, respectively. We have 50 valued the stock on an SOTP basis assigning it a target price of | 182. 4,800 Exhibit 1: Financial Performance | crore 4,400 0 (Year-end March) FY12 FY13 FY14E FY15E FY16E Aug-12 Nov-12 Feb-13 May-13 Aug-13 Total Operating Income 6,640.0 7,351.0 8,498.4 9,402.7 10,292.0 EBITDA 623.1 768.5 942.4 1,062.4 1,187.4 Price (R.H.S) Nifty (L.H.S) PAT (Adjusted) 339.2 393.7 479.3 548.7 620.7
Analyst’s name EPS Adjusted (|) 5.5 6.4 7.8 8.9 10.0 EV/EBITDA (x) 14.5 11.7 9.9 8.6 7.5 Sanjay Manyal Debt/Equity (x) 0.2 0.1 0.2 0.2 0.2 [email protected] RoNW (%) 7.8 7.7 9.3 9.9 10.4 Parineeta Poddar RoCE (%) 8.3 10.5 12.2 12.6 12.9 [email protected] Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Shareholding pattern (Q1FY14) Company Background Shareholder Holding (%) Promoters 35.2 Tata Global Beverages (TGBL), formerly known as Tata Tea, was Institutional Investors 36.4 established in 1983. The company is the market leader in the domestic Public 28.4 branded tea market (FY13) and a dominating player in the branded tea and coffee in the markets of UK, US and Canada. FII & DII holding trend (%) TGBL entered the branded tea business in 1991 and has grown over the years through acquisitions and joint ventures. Till date, the largest 30 acquisition for the company has been the European tea brand Tetley in 25.2 23.2 25 19.2 2000 for $450 million. The other major acquisitions by TGBL include tea 19.1 18.5 20 15.4 16.5 17.8 17.9 18.5 company Good Earth in the US (2005), Eight O’ Clock (EOC) coffee brand 15 in the US (2006) and coffee brand Grand in Russia (2009). Apart from tea 10 5 and coffee, the company has expanded its beverage offerings to the 0 mineral water business by investing in Mount Everest Mineral Water Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Company (2007) that owns the Himalayan brand. With the diversification FII DII in the product basket of Tata Tea, the company changed its name to Tata Global Beverages in 2010 with the aim of establishing itself as a global beverage company from a branded tea marketing company.
In November, 2010, TGBL entered into a 50:50 joint venture with PepsiCo Ltd to develop, manufacture, sell and distribute hydration beverages under the JV, NourishCo Beverages. Further, in 2012, TGBL entered into a 50:50 JV with Starbucks Coffee International Inc, US to set up Starbucks coffee stores in India. With successful acquisitions over the years, net revenues and earnings (adjusted PAT) have grown at a CAGR (FY09-13) of 10.5% to | 7232.4 crore and 9.3% to | 400.9 crore, respectively. Gross revenues (| 7270.3 crore in FY13) consist of ~73% from tea, ~26% from coffee, ~1% from water and other businesses. Geographically gross revenues (FY13) are comprised of 31.8% from India, 21.3% from the UK, 27.4% from the US and Canada and 19.5% from other countries (Poland, South Africa, Australia, Czech Republic). With the company’s leading position across geographies and a strong portfolio of brands, we expect revenues and earnings to post a CAGR of 12% and 15.7%, respectively, in FY13-16E.
Exhibit 2: TGBL's timeline
Group acquires EOC, US & energy water brand Integration of Tata enters into JV with Starbucks; Eight O' Tata Tea ‘Glaceau’; Tetley group beverages brands Tata Global alliance with James Clock signs agreement with acquires the acquires Jemca in Czech announced; Group Beverages Finlay to form Tata Green Mountain Coffee Tata Tea enters Tetley Republic & 33% in Joekels acquires Grand corporate brand Finlay Roasters Inc brand business Group Ltd Tea, South Africa Coffee, Russia announced
1964 1988 1991 1993 2000 2005 2006 2007 2009 2010 2011 2012
Tata Tea is Investments in Mount Everest JV with Allied Tetley Group Acquires stake in The Rising born, James Mineral Water, which owns Lysons Plc, Tata acquires Good Beverage Co. LLC, which owns Finlay is Himalayan Water brand; Tetley Tetley is Earth, US Activate Brand; JV with bought out group acquires Polish tea brand established PepsiCo named NourishCo; Vitax; Sells ‘Glaceau’ to Coca Cola Increases stake in Joekels Tea
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 2
Exhibit 3: TGBL structure Tata Global Beverages (Holding Company) Subsidiaries Name Brands Segment Geography Tata Global Beverages (Standalone) - 100% stake Tata Tea (Premium, Gold. Gold Darjelling) Tea India
Tata Tea Agni Tea Tata Tea Chakra Tea Kanan Devan Tea Tata Global Beverages Group Ltd. - 88.7% stake Tetley Tea Across the world Joekels Tea South Africa Good Earth Tea USA Jemca Tea Czech Republic Vitax Tea Poland Grand Tea & Coffee Russia Tata Coffee Ltd (57.48% stake) Tata Coffee Plantation India & Exports Eight O' Clock Coffee Coffee USA Activate Functional Water USA Mount Everest Mineral Water Ltd. (50.1% stake) Himalaya Water India Joint Ventures Name Brands Segment Country NourishCo Beverages (50:50) with PepsiCo Tata Water Plus Functional Water India Tata Gluco Plus Functional Water India Tata Starbucks Ltd (50:50) with Starbucks Coffee Inc US Starbucks (Coffee Retail) Coffee India
Source: Company, ICICIdirect.com Research
Exhibit 4: Gross revenue (| 7270.3 crore in FY13) break-up by segment Exhibit 5: Total operating revenue (| 7351 crore in FY13) by brands Others 1% Others 13% Coffee 26% Tetley Eight O' Clock 38% Coffee 17%
India Tea Brands Tea 32% 73%
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Investment Rationale
Revenue mix: Increasing contribution of coffee to aid revenue, PBIT growth FY13 revenues (gross revenues of | 7270.3 crore) are comprised of 72.8% from tea, 26.2% from coffee and 1% from other businesses (water and joint ventures). Going ahead, by FY16E, we expect the contribution of tea to decline to 64.8%, coffee to increase to 29% and others to increase to 6.2%. The higher contribution of coffee to revenues would be driven by 15.7% growth (CAGR in FY13-16E) in coffee revenues compared to 7.6% growth (CAGR in FY13-16E) in tea revenues. The significant increase in contribution of others to 6.2% by FY16E from 1% (FY13) would be aided by revenues from joint ventures (largely Starbucks).
Exhibit 6: Revenue break-up: Contribution of coffee slated to increase from ~26% in FY13 to ~29% by FY16E (| crore)
100% 157.5 134.4 664.8 895.4 1012.5 1299.3 1423.3 1706.4 1903.3 80% 2503.5 2719.2 2944.9
60% 2844.4 2930.0 3317.4 40% 3407.0 3767.6 4381.8 4476.7 4766.8 5291.4 5639.7 6117.7 6588.0 20%
0% FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Tea Coffee Others
Source: Company, ICICIdirect.com Research
The largest share in profitability (FY13 PBIT of | 807.8 crore) is accounted by the tea segment at 67.4% with the share of coffee being 35.8%. The The coffee segment’s increase in contribution to others segments continue to remain under losses as they are in the revenues from 5.2% in FY05 to 26.2% in FY13 was aided investment phase. With margins from the coffee business being higher at largely by the acquisition of the two large brands, Eight ~15% (FY13) compared to tea at ~10% (FY13) we believe the increasing O’ Clock Coffee in the US (2006) and Grand in Russia contribution of coffee to revenues would drive margins at a higher rate, (2009) going ahead. Further, with the water business (Himalayan brand) turning profitable in FY13 and JV businesses to achieve breakeven by FY16E, we expect earnings (PBIT) to grow at a higher rate of 14.4% CAGR (FY13-16E) against 6.6% CAGR (FY08-13).
Exhibit 7: Segment wise contribution to PBIT (| crore) Exhibit 8: PBIT margins from tea & coffee (%)
18.4 100% 20 16.6 16.9 148.8 146.6 239.7 240.6 196.1 14.5 15.2 80% 289.2 15 11.5 60% 13.9 10 13.1 11.8 40% 621.1 560.3 799.6 651.2 683.4 807.8 10.6 9.4 10.3 20% 5
0% 0 -20% FY08 FY09 FY10 FY11 FY12 FY13 FY08 FY09 FY10 FY11 FY12 FY13
Tea Coffee Others Tea Coffee
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 4
Tea: Growth to be supported by premiumisation and innovation Revenues from tea stood at | 5291.4 crore (FY13) recording a CAGR of 9.2% in FY08-13. Going ahead, we expect tea revenues to grow at 7.6% CAGR in FY13-16E driven by premiumisation in the domestic tea market (12.6% CAGR FY13-16E), higher innovations driving growth in the UK (4.1% CAGR in FY13-16E), capture of the evolving tea market of the US (5.4% CAGR FY13-16E) and consolidation of market share in Poland, South Africa, Czech Republic and Australia. Hence, we expect tea revenues across geographies to be driven largely by prices (premiumisation, innovations and change in sales mix) with volume growth remaining modest.
Exhibit 9: Tea revenues (| crore) & growth trend
7000
6000
5000
4000
3000
2000
1000 3407.0 3767.6 4381.8 4476.7 4766.8 5291.4 5639.7 6117.7 6588.0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Tea revenues
Source: Company, ICICIdirect.com Research
Exhibit 10: Tea portfolio Brand Acquired/Owned Year Country Value Remarks Good Earth Acquired October, 2005 US $32 million 20.6% volume market share; strong presence in West Coast
Joekels Tea Acquired October, 2006 South Africa NA Third largest player in South Africa; Its main brands are: Laager, Tea Time Range, Tea4Kidz, San Aqua & Rooibos Ice Tea Jemca Acquired May, 2006 Czech Republic NA Market leader in Czech Republic Tata Tea Owned 1988 India - Market leader in India (volume and value); completed 25 years in FY13; Main brands include: Tata Tea Premium, Agni, Chakra, Gemini, Kanan Devan Tetley Acquired Feburary, 2000 UK, Canada, Australia, US, etc $450 million Second largest tea brand globally; market leader in Canada; brand leader in decaffinated tea in UK Vitax Acquired 2007 Poland NA 16% share of the fruit tea market of Poland
Source: Company, ICICIdirect.com Research
Among the basket of TGBL’s tea brands, we believe ~54% of tea revenues and ~38% of TGBL’s consolidated revenues are constituted by Tetley (Tetley revenues in FY13 estimated at ~| 2800 crore). We believe with the global presence of Tetley, it would continue to be the dominant contributor to revenues.
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 11: Share in revenues by brands
100% The largest brand in the company’s consolidated 90% 24.0% 22.5% 29.0% 30.0% revenues (FY13) has been ‘Tetley’ contributing ~38% 80% 26.0% 29.0% followed by the Indian tea brands (Tata Tea) contributing 70% ~32%. This, we believe, is supported by the global 60% 20.6% 27.8% 30.0% 29.0% 30.0% 32.0% presence of ‘Tetley’ 50% 40% 30% 51.6% 45.9% 20% 40.0% 39.0% 40.0% 38.0% 10% 0% FY08 FY09 FY10 FY11 FY12 FY13
Tetley Indian Tea Brands Others
Source: Company, ICICIdirect.com Research *Others in FY12 & FY13 contain contribution of Jemca, Vitax, Coffee and water brands Others (FY08-11) depicts contribution of coffee and water brands
According to geographic break-up of tea revenues (FY13), we estimate that currently India is the highest contributor with ~44% (| 2273.3 crore), followed by the UK at ~27% (~| 1400 crore), US & Canada at ~15% (~| 800 crore) and ~14% (~| 700 crore) from Australia, Czech Republic, Poland, Russia and South Africa. With highest growth in tea revenues expected from India we expect India’s dominance in TGBL’s tea revenues to increase to 49.3% by FY16E. We expect the share of the UK to decline to 24% by FY16E due to the deceleration in the black tea market in the UK and specialty tea driving UK’s tea revenue growth. The share of the US and Canada would also fall to 14% by FY16E as we believe the shift of coffee drinking consumers to tea would remain slower compared to the higher rate of change in sales mix in India. India: Market leadership, premiumisation to drive growth! TGBL’s Volume market Share Tea revenues in India have grown at a CAGR of 15% in FY08-13 posting 22 20.3 20.5 19.9 sales of | 2273.3 crore in FY13. Going ahead, we believe that with TGBL’s 19.7 19.5 19.6 19.6 19.2 18.9 18.9 20 18.5 18.6 market leadership in the domestic branded tea market, strong marketing strategies (Jaago Re! campaigns) in the country and increasing sales of 18 16.7 Achieved mkt leadership and has green and specialty teas (Tetley offerings), tea revenues would grow at a maintained it since then 16 healthy CAGR of 12.6% (FY13-16E) to | 3246 crore by FY16E. Our assumption is based on the premise that TGBL would maintain its current 14 volume leadership in the domestic tea market until FY16E. Therefore, any incremental gains would further aid the company’s revenues. FY06 FY07 FY10 FY12 Q1FY08 Q2FY11 Q1FY12 Q2FY12 Q3FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 We estimate that currently (FY13), black tea constitutes ~94% (| 2131.2 Source: Company, ICICIdirect.com Research crore) of TGBL’s Indian tea revenues, green tea constitutes ~5% (| 102.3 TGBL is the market leader of the Indian branded tea market (~450 crore) and specialty tea constitutes ~1% (| 39.8 crore). With the growing million kg by volume) with a share of 20.5% by volume and 22.2% demand for green and specialty tea in the country, we expect black tea’s by value (FY13). contribution in the country’s tea revenues to fall to ~91% (| 2970.1 crore clocking ~12% CAGR in FY13-16E), green tea’s contribution to increase to ~6% (| 194.8 crore growing at ~24% CAGR in FY13-16E) and specialty tea’s contribution to increase to ~3% (| 81.2 crore at ~27% CAGR in FY13-16E). Further, the higher contribution of specialty teas would also drive higher realisation/kg and increase the contribution of tea bag sales in the sales mix, supporting realisations.
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 12: Growth in domestic tea revenues driven by price increases, marketing campaigns & TGBL’s market leadership position (| crore)
Second Jaago Re! Launched Strong growth in Price increases Significant price increases 3500 campaign 3246.0 30% Jaago Re! Premium, Gold & taken in FY09 taken in FY09 & FY10 impact Agni post Jaago Re! support growth growth 2908.6 3000 campaign 25% 2602.5 2500 24.2% 2273.3 20% 1991.5 2000 19.9% 1686.8 1777.6 15% 1500 1357.9 1132.2 14.1% 14.5% 10% 1000 5.4% 12.0% 11.8% 11.6%
500 7.6% 5%
0 0% FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E Sales (| core) % Increase
Source: Company, ICICIdirect.com Research
Exhibit 13: Domestic tea brands portfolio TGBL’s India portfolio has brands across the value pyramid Brand Segment Price (|/kg) Remarks Tata Tea Premium Premium 336 Flaghip brand; Volume leader in India The share of domestic tea brands in consolidated revenues Tata Tea Gold Premium 396 Fastest growing brand in the portfolio has increased from 20.6% in FY08 to 32% in FY13 Tata Tea Gold Darjelling* Premium 90 Premium tea launched as tea bags Chakra Gold Premium 420 Leading brand in Andhra Pradesh
Tata Tea Life Popular 348
Tata Tea Agni Economy 250 Nearest competitor of unbranded players TGBL has recently launched the Tetley brands in India Gemini Economy NA Market Leader in Andhra Pradesh largely in the tea bags format. The company has guided that Kanan Devan Economy 213 Leading brand in Kerala it is witnessing ~50% YoY growth in Tetley’s offerings
Tetley Variants Flavors Black Assam Tea Green Plain, Long Leaf, Ginger Mint & Lemon, Lemon The growth expected in the tea industry in India at ~15% & Honey per annum would have a higher contribution of prices (led Flavoured Masala, Lemon, Ginger, Elaichi, Tulsi & largely by premiumisation) than volumes. We believe the Lemon, Earl Grey
higher growth of 20.9% CAGR expected in tea bags consumption would significantly aid margins of tea Source: Company, ICICIdirect.com Research companies *It is the price of tea bags, 25 nos (~50 grams)
Comparison of revenues from loose tea vs. tea Indian tea market: A snapshot bags (Brand: Tata Tea Premium) Price Grams India is currently a tea drinking nation (black tea) with ~870 million kg of Loose Tea 335 1000 annual consumption (CY12, Source: Tea Board of India). The market is Tea Bags (2 gms/pag) 95 200 equally dominated by branded (~50% of the consumption demand) as well as unbranded players. The penetration of the commodity is very high Hence, revenues from sale of 1000 gm of tea bags would (~95%). Hence, demand growth for branded players is largely led by be | 475 crore, ~42% higher from the sale of same amount capturing the share of unbranded players and growth in varieties of loose tea. Hence, an increase in the sales of tea bags (specialty tea, green tea) other than black tea. would aid margins significantly, going ahead Exhibit 14: Facts about domestic tea industry
Tea Industry Size (| crore)-2011 19500 Tea Industry Size (| crore)-2015E 33000 Growth (p.a.) 15% Tea Bag Consumption In India in 2011 (tonnes/year) 7000 Tea Bag Consumption In India in 2015E (tonnes/year) 15000
Growth in the flavored tea market (p.a.) 25%
Source: Assocham, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
United Kingdom: Innovation key to growth… Revenues from the UK are dominated by its largest tea brand Tetley. Tetley is the market leader having ~27% share by value (CY12). We estimate that tea revenues from the UK in FY13 stood at ~| 1400 crore (~90% of total UK revenues in FY13) growing at 5.6% in FY08-13E. We expect tea revenues from the UK to grow at a CAGR of 4.1% in FY13-16E to | 1577.9 crore (FY16E). We believe growth in UK tea revenues will be Tea drinkers comprise ~88% of the population above 65 driven by a change in the product mix and increasing contribution of years of age and 73% among 15-34 year olds in the UK premium offerings (Kenyan Tea, Red Bush, Specialty Tea and Herbal Infusions). Further, the constant innovation and new offerings by TGBL in the UK through increased marketing initiatives would be key in keeping growth intact in UK markets in spite of a slowing black tea market. Hence, we estimate sales growth in UK’s tea revenues will be supported by highest growth in green tea (~25% CAGR FY13-16E) and a moderate growth in fruit & herbal tea and instant tea at ~5% CAGR in FY13-16E. The growth in black tea would remain subdued at ~3% CAGR in FY13-16E.
Exhibit 15: Estimated UK sales (Tetley) (| crore)
Slowdown in black tea sales,
Premium & Specialty tea to support
sales growth TGBL entered the UK market with the acquisition of the world’s 1500 CAGR 4.1% second largest and UK’s largest tea brand Tetley in February, CAGR 5.6% 2000. TGBL had acquired the brand for $420 million. Due to the global presence of the brand, the acquisition had actually provided 1000 TGBL an entry into 70 countries across the globe
500
952 1018 1164 1059 1166 1252 1286 1365 1441 0 FY08E FY09E FY10E FY11E FY12E FY13E FY14E FY15E FY16E
Source: Company, ICICIdirect.com Research We have assumed that ~80% of TGBL’s UK revenues are generated by Tetley Sales
Exhibit 16: Tetley's offerings in UK market Tea Variant Flavors Remarks Black Original & Decaf Black tea is sourced from Africa and India (Assam) and blended Extra Strong together; Black tea consumption is witnessing slowdown in Easy Squeeze consumption Green Pure & Decag Green tea acquired from Asia and Africa is blended together. Green The number of tea variants along with the equally higher Lemon Green tea market in UK is growing faster than the specialty tea and black Honey Green tea. Higher contribution of green tea is also aiding the margin number of flavours shows that TGBL has identified the Blueberry Green improvement. opportunity in the specialty tea segment in UK. We believe the Green & Black Blend of both Unique blend of black tea from Africa and India (Assam) with green TGBL’s continued innovation in the fruit & herbal tea segment tea from Asia. would keep the company’s leadership position intact in the UK Kenyan Tea Estate Selection Launched in Q4FY13 it is a premium Kenyan tea market, going ahead Redbush Pure Redbush from South Africa is available originally as well as with Vanilla vanilla Speciality Earl Grey It is present in original and with vanilla flavour Herbal Infusions Peppermint Herbal infusions are tea infused with herbal benefits Camomile
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
UK tea market: An overview Similar to India, the UK is largely a tea consuming nation having high penetration (~87% as in 2011) of the beverage. However, unlike India the UK market is largely branded with unbranded and private players having only 5% share. Majority of the tea consumed in the UK is black tea (~80% of total tea consumed in 2011). Specialty tea, green tea and fruit & herbal tea form a smaller share in the overall tea consumption but are growing at a higher rate than the black tea market. Therefore, the key to grow and consolidate market share in the UK is through innovation and new launches. TGBL has successfully capitalised on this opportunity by launching a number of variants within existing varieties year after year. Further, TGBL has also launched products in the super premium categories to aid its revenue and profitability growth in the UK. US & Canada: Strength of TGBL in Canada yet to spread to US Tea revenues in the US are accounted by Tetley and Good Earth Tea (acquired in 2007) and in Canada by Tetley. We estimate that out of the total revenues of | 1993.7 crore (FY13) from the US & Canada, ~45% is constituted by tea sales (| 788.3 crore). Tea revenues from the US & Canada have grown at a CAGR of 3.5% in FY08-13E, which we expect to increase at a higher rate of 5.4% CAGR in FY13-16E. The higher rate of increase from tea sales is expected on the back of new premium launches (Pure Ceylon tea, premium variant, launched in Canada in FY13) and higher demand for specialty tea.
Exhibit 17: Tea sales in CAA (| crore)
Significant increase led Premium launches in Canada and Australia 1000 by launch of liquid 900 infusions & additional 800 flavours in Canada 700 600 500 843.0 772.1 818.4 400 749.5 679.9 718.2 601.3 572.0 652.9 300 200 100 74.3 78.0 80.4 0 61.1 72.7 57.8 59.8 65.5 70.1 FY08E FY09E FY10E FY11E FY12E FY13E FY14E FY15E FY16E
Good Earth Sales Tetley Sales
Source: Company, ICICIdirect.com Research
US The US is largely a coffee consuming nation (coffee consumption in the US is 9.39 lb/person compared to tea consumption of 0.9 lb/person in 2011). However, the consumption rate of coffee is declining (by volumes) with tea sales catching up at a fast rate. According to the Tea Association of America, the tea market in the US has grown from $1.8 billion in 1991 to $8.2 billion in 2011 (CAGR of ~7.9%). It is expected to grow at a higher rate from here on with the sharpest growth expected in green tea. Therefore, specialty tea driving tea demand in the US, TGBL’s presence in the segment through ‘Good Earth‘ (a speciality tea brand largely present in the West Coast) and increasing foray through Tetley would drive revenues to grow at 4.7% CAGR in FY13-16E against 2.8% CAGR in FY08- 13E.
ICICI Securities Ltd | Retail Equity Research Page 9
Exhibit 18: TGBL's offerings in US
Tetley Variants Flavors Classic Blend Original & Decaf British Blend Premium Black & Decaf Pure Green Original& Decaf Iced Tea Original & Decaf
Good Earth Variants Flavors Drivers of the US tea market are refrigerated tea and ready Original Tea Sweet & Spicy to drink tea. Total ~85% of the tea consumed in the US is Super Fruit White Tea Mangosteen & Mango iced tea Green Tea Lemon Grass Plain & Decaf, Matcha, Sencha & Orange, Jasmine, Gingseng Citrus, Mango Peach & Pineapple Chai Teas Plain, Decaf, Vanilla, Cocoa & Seven Spice Black Tea Sweetly twisted, Cocoa Tango, Tropical Peach, English Breakfast, Earl Grey & Apricot Ginger White Tea Vanilla, Vanilla decaf, Citrus Medicinal Teas For Cold, Sleep & Slimming
Source: Company, ICICIdirect.com Research
Canada: Tetley is the volume leader in Canada with ~39% share by volume and ~31% share by value (Euromonitor). The tea market in Canada was estimated to be $415 million in 2011 and is estimated to increase to $541 million by 2017 (CAGR 4.5%). The Canadian market is largely dominated by black tea consumption by volume (76.6% volume market share in 2012) and specialty tea consumption by value (~60% of value market share in FY12). With the black tea market attaining saturation in Canada, specialty tea is the growth driver fuelled by more consumption of specialty black (up 27% YoY in 2012) and fruit & herbal (up 11% YoY in 2012) teas. Hence, led by Tetley’s market leadership in Canada, innovation in the black tea category (orange pekoe along with flavours introduced in the portfolio, offering alternatives to black tea consumers) and strengthening green, fruit and herbal tea portfolio, (Tetley Green Tea Plus and Herbal Cocktail-Inspired Teas launched in 2012), we expect tea revenues from Canada to grow at 5.5% CAGR in FY13-16E against 3.6% CAGR in FY08- 13E. The higher contribution of specialty teas would drive the higher revenue growth while we expect volume growth to remain modest. Further, TGBL’s launch of its domestic tea brand Tata Tea in Canada in H1CY13 to meet the demands of the large Indian population residing there would further aid black tea revenues from Canada.
Exhibit 19: TGBL's offerings in Canada
Tea Variant Flavors Black/Orange Pekoe Original, Decaf, Bold & Ceylon Green Pure, Decaf, Earl Grey,Honey Lemon/Mint/Pomegranate, Jasmine, Lyshee Pear, Passion Fruit Acai, Blueberry Green Green tea plus Aware, Glow, Figure Herbal Cammomile Mint - Calm, Blueberry Ginseng - Clarity,lemon balm & honey - Cleanse,Cammomile Lemon - Dream, Mint Lime - Mojito, Pure Peppermint Flavoured Black Chai, Dark Chocolate, Vanilla, Earl Grey, Camommile Rooibos Plain, Vanilla, Red Berry, Spice Plum Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Other geographies: Strengthening regional presence TGBL has ventured into geographies across the world by acquiring tea brands in the respective geography and introducing Tetley brands and flavours in these tea drinking nations.
Exhibit 20: TGBL’s brands in other geographies
Geography Brand Remarks Poland Vitax Vitax has ~16% share of the fruit & herbal tea market in Poland South Africa Joekels Offers products under the name 'Laager", 2nd largest brand in South Africa Russia Grand Tea Offers flavoured, green and iced tea variants. Czech Republic Jemca Market Leader with 20.6% volume share, Available in Black, Green and Fruit & Herbal teas
Source: Company, ICICIdirect.com Research
Tea revenues from these geographies are estimated to be | 711.9 crore (FY13) accounting for ~14% of tea revenues. Going ahead, we expect the contribution to tea revenues from these brands to remain at ~13% until FY16E, supported by a CAGR of 5.7% (FY13-16E) clocking revenues of ~| 840 crore by FY16E. Therefore, tea revenue growth of 7.6% CAGR in FY13-16E would be driven by higher growth in specialty tea across all geographies driving revenues primarily through prices. Riding on Tetley’s brand strength and ability to blend new flavours across all categories of tea (black, green and fruit & herbal tea) we believe innovation and premium offerings would further support the growth in tea revenues.
Exhibit 21: Snapshot of tea revenues across geographies (| crore)
FY13E FY14E FY15E FY16E CAGR FY13-16E Tea revenues 5291.4 5639.7 6117.7 6588.0 7.6% % Increase 11.0% 6.6% 8.5% 7.7% India 2273.3 2602.5 2908.6 3246.0 12.6% Contribution % 43.0% 46.1% 47.5% 49.3% UK 1399.7 1427.7 1505.2 1577.9 4.1% Contribution % 26.5% 25.3% 24.6% 24.0% USA & Canada 788.3 846.4 896.4 923.3 5.4% Contribution % 14.9% 15.0% 14.7% 14.0% Others 711.9 763.2 807.4 840.7 5.7% Contribution % 13.5% 13.5% 13.2% 12.8% Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
Coffee: Increasing share in portfolio to aid earnings TGBL’s coffee business revenues include plantation revenues and sale of branded coffee. Coffee revenues have grown at 16.3% CAGR in FY08-13 to | 1903.3 crore (FY13). Consequently, the segment’s contribution has increased from 20.5% (| 895.4 crore) of consolidated sales in FY08 to 26.2% (| 1903.3 crore) in FY13. Going ahead, we expect the segment to grow at 15.7% CAGR (FY13-16E) to | 2944.9 crore (FY16E) and its share in overall revenues to increase to 29%. We expect the higher growth rate to be contributed by the premiumisation in the coffee markets in the US, consolidating market share in Russia and higher realisations from supplying to Starbucks stores in India (currently) and international markets, going ahead. TGBL is scouting for international acquisitions for its coffee business and planning to increase its Indian capacity further. We believe these would account for incremental contribution to revenues from the segment, going ahead.
Exhibit 22: Coffee revenues (| crore) trend
Grand Tie up witn K-cups Acquired 1903.3 2000 relaunched Grand in 1706.4 Russia 1600 1423.3 1299.3 1200 Acquired 1012.5 895.4 EOC in USA 800 664.8
400 157.5 134.4
0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Source: Company, ICICIdirect.com Research
Exhibit 23: Coffee portfolio
Brand Acquired/Owned Year Country Value Remarks Grand Acquired Sept, 2009 Russia NA Market Leader in Russia with Grand Prado, Grand Gold & Grand Cocoa
Eight O' Clock Acquired July, 2006 USA $220 million Third largest coffee brand by volume in the US Mr Bean Owned NA India, Russia and Middle East NA The brand is largely exported to Middle East countries Coorg Pure Owned NA India NA 100% pure filter coffee Coorg Filter Coffee Owned NA India (South) NA Chain of 35 outlets offering consumers in Tamil Nadu & other states fresh, roast and ground coffee Mysore Gold Owned NA India, Russia & Ukraine NA It is a popular brand sold largely in South India Tata Café Owned NA India NA Pure instant coffee Tata Kaapi Owned NA India NA India's No. 3 Coffee Chicory Brand
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
Exhibit 24: Coffee revenues by brands (| crore)
100% 139.1 90% 237.9 307.9 375.9 80% 70% 60% 675.9 802.0 50% 961.2 914.5 1040.5 1099.3 40% 30% 20% 218.1 10% 210.5 199.1 270.8 358.1 428.0 0% FY08 FY09 FY10 FY11 FY12 FY13
Tata Coffee Std EOC Others
Source: Company, ICICIdirect.com Research
Tata Coffee Tata Coffee (TCL) is a 58% subsidiary of Tata Global Beverages. TCL is the largest integrated coffee player in India and the third largest exporter of instant coffee. The company produces ~10000 MT of both Arabica as well as Robusta coffee through its 19 coffee estates (~8000 hectares) in South India. TCL’s revenues by FY13 (| 428 crore) have witnessed a CAGR of 14.4% in FY08-13. We expect this to increase to | 770.8 crore by FY16E with growth at 21.7% CAGR in FY13-16E. The higher revenues would be supported by higher curing operations as well as supply to Starbucks stores across India (currently) and Starbucks stores across Asia (in future). Apart from coffee, TCL is also engaged in the plantation of tea and other agricultural products (cardamom and pepper). Revenues from these stood at | 146.7 crore (25.5% of FY13 revenues). Going ahead, we expect revenues from these products to grow at a modest CAGR of 7.4% (FY13- 16E) against 11.7% (FY08-13) as the company’s focus would remain on its dominant business, coffee.
Exhibit 25: TCL’s revenues from coffee (LHS) and standalone revenues (LHS) in | crore
1000 ~60% increase in 914 40 instant coffee 777 771 35 800 volumes 653 638 30 574 25 600 489 521 401 428 20 358 312 327 400 301 271 15 218 211 199 10 200 5 0 0 -5 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E -200 -10 Dip in sales volumes Coffee Revenues-Std TCL Standalone % Increase in coffee revenues
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
Following the holding company’s JV with Starbucks Inc, US, TCL has set up a special roasting facility in Kushalnagar (~2000 MT operational since FY13) to cater exclusively to the requirements of the Tata Starbucks stores setup across the country and South East Asia. The roastery would be utilising the beans produced in TCL’s estates. We believe this pact would provide incremental sales volume as well as better realisation,
going ahead. TCL is also expanding its Theni facility in Tamil Nadu for instant coffee to meet the higher export demand.
Further, TCL expanded its portfolio outside India and entered the US market through the acquisition of Eight O’ Clock Coffee in July, 2006. Eight O’ Clock Coffee Eight O’ Clock Coffee (EOC) was acquired by TGBL, though its subsidiary TCL in July, 2006 extending the company’s coffee portfolio to the international branded coffee market.
EOC is the fourth largest coffee brand by volume in the US with sales of
| 1099.3 crore (FY13). Revenues have grown at a CAGR of 10.2% in FY08- 13 led largely by prices. Volume growth has remained grim on the back of slowing coffee consumption in the US. Going ahead, we expect revenue growth in EOC to moderate to 4.2% CAGR in FY13-16E as we believe further increase in prices would be tough and could impact volume growth. In FY11, sales were impacted significantly by a substantial increase in prices by the company, which impacted volume growth. The price increase was on the back of an increase in Arabica coffee prices (~36% YoY), the key raw material. As coffee prices started declining from FY12 onwards, sales growth has revived for EOC.
Exhibit 26: EOC sales (| crore)
1500 Sales growth was led by prices and 25 positive impact of forex translation. 1242.4 1154.2 1200.4 1099.3 1200 1040.5 20 961.2 Coffee prices (Brazilian Real/60 kg) 914.5 900 802.0 15 675.9 600 600 10 500 400 300 5 300 200 0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E -300 -5 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
EOC % Increase Source: Bloomberg
1 USD = 2.2991 Brazilian Real; 1 USD = 61.1 INR Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 14
Exhibit 27: EOC's product portfolio in US
Coffee type Formats Flavours Medium to Dark Roast Original, Colombian, French Roast, Italian Dark Roast Hazel Nut, French Vanilla & Mocha Reduced Caffeine Decaf Original, 50% decaf EOC Metabolism Boost Metabolism Boost
Source: Company, ICICIdirect.com Research
With the US coffee market moving towards the single serve PODS consumption (~18% of US coffee market is constituted by PODS), EOC Coffee pods are pre-packaged ground coffee beans in their tied up with Keurig in FY12 and launched EOC K-cups version. In spite of own filter. K-cups contributing positively to the brand’s growth, EOC has been K-Cup portion packs are used with Keurig or other single witnessing an overall stress in volume growth (adjusting with our without cup brewing systems to brew a cup of coffee, tea, or hot PODS sales) keeping the revenue growth lower at 5.7% in FY13. Going chocolate. Each K-Cup is a plastic container with a coffee ahead, though the company plans to invest significantly behind its brands filter inside. Ground coffee beans are packed in the K-Cup and launch more variants in the coffee segment, we estimate moderate and sealed air-tight with a combination plastic and foil lid. sales growth of 4.2% CAGR FY13-16E, as we believe EOC does not have When the K-Cup is placed in a Keurig brewer, the brewer pricing power in the US coffee market. Further, with any uptick in coffee punctures the foil lid and the bottom of the K-Cup and prices, passing on the higher input cost through prices impacts EOC’s forces hot water under pressure through the K-Cup and into volume growth. Therefore, driven by the high vulnerability to coffee a mug. (Source: Wikipedia) prices we remain wary of EOC’s growth.
Exhibit 28: Facts about US coffee consumption
Total US coffee sales (2012) $59 billion Sales by food services 87% Retail Sales 13% Highest specialty coffee drinkers are the 25-45 years old Speciality coffee sales (% of retail sales) 30% citizens Growth of Speciality coffee sales (YoY) 20%
Per Capita Coffee consumption (2011) in kg 6.22 Source: http://www.ncausa.org/i4a/pages/Index.cfm?pageID=731; Euromonitor ; ICICIdirect.com Research
Exhibit 29: Slowing coffee consumption volumes in US (in ‘000 bags)
22500 22044
22000 21783 With the US coffee market being saturated and traditional 21652 21436 coffee consumption taking a back seat, similar to India’s tea 21500 market, we believe the growth would largely come from 20998 21033 21000 higher gourmet coffee consumption 20667
20500
20000
19500 2005 2006 2007 2008 2009 2010 2011
Source: http://blog.euromonitor.com/2012/06/us-pod-coffee-market-poised-for-further-expansion.html, ICICIdirect.com Research
The US is the largest coffee consuming nation with ~83% of the adults drinking coffee (CY12). Though the overall consumption in the US remains high, growth in consumption is being driven by gourmet coffee beverages. Traditional coffee consumption has declined from 56% (CY11) to 49% (CY12). Hence, with EOC’s portfolio largely consisting of premium coffee, we believe value growth would remain at ~4% CAGR in FY13-16E. However, a revival in volume growth could only come through market share gains, which would involve huge expenditure behind the brands keeping the company’s margins from EOC under stress.
ICICI Securities Ltd | Retail Equity Research Page 15
Grand Grand is the fourth largest player in the Russian instant coffee market. It was acquired by TGBL in September, 2008. Grand coffee was re-launched in 2010 by introducing large amount of flavours and varieties. Russia is relatively a smaller market for TGBL (I-direct estimate: ~| 230 crore coffee revenues in FY13) currently. The annual per capita coffee consumption in Russia is very low at 0.7 kg compared to ~6 kg in Germany and ~7 kg in the US. However, coffee consumption in Russia is gaining strength albeit slowly. We believe that in order to establish itself in the under penetrated Russian market, TGBL needs to improve its presence in Russia and achieve greater market share to accelerate its revenues. Hence, we believe TGBL’s coffee revenue growth of 15.7% CAGR in FY13- 16E would be driven mostly by higher sales volume and realisation from India’s plantation revenues (21.6% CAGR from FY13-16E). The growth in the US coffee market, however, would remain modest at 4.2% CAGR in FY13-16E and would be largely driven by increasing specialty coffee sales growth in traditional coffee remaining strained.
Exhibit 30: TGBL's coffee revenues (| crore)
100% 90% 237.9 307.9 375.9 880.8 931.7 80% 828.3 70% 60% 50% 914.5 1040.5 1099.3 1154.2 1200.4 1242.4 40% 30% 20% 10% 270.8 358.1 428.0 521.0 638.0 770.8 0% FY11 FY12 FY13 FY14E FY15E FY16E
Coffee Revenues-Std EOC Others
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 16
Water: Building strength in under penetrated category
Water accounts for less than 1% of TGBL’s revenues, currently. Revenues
from water are accounted by Himalayan, Tata Water Plus, Tata Gluco Plus and Activate. The sales and marketing of TGBL’s water brands are carried out through NourishCo Beverages (50:50 joint venture between PepsiCo and TGBL), which helps the company to capitalise on PepsiCo’s distribution channel.
Exhibit 31: Water portfolio Mineral water segment in India (| crore) Brand Type of Water Geography Remarks 4000 Himalaya Mineral Water India TGBL has acquired the brand by acquiring 50.07% stake in Mount Everest Mineral 3000 CAGR 19% Water Limited 2000 Tata Water Plus Fortified Water India Brand was introduced in FY13 and is 3000 marketed in Tamil Nadu and Andhra 2200 2400 1000 1500 1800 Pradesh 0 Tata Gluco Plus Glucose Water India Launched in FY13. Available in 3 flavours - FY08 FY09 FY10 FY11 FY12 Lemon, Orange & Mango Activate Vitamin Water USA TGBL has acquired this brand by investing in a small start up company in USA in Source: MEMW, Annual Report FY13.
Source: Company, ICICIdirect.com Research
Revenues from Mount Everest Mineral Water (MEMW), (Himalayan brand) stood at | 22 crore in FY13. TGBL also supplies Himalayan to Starbucks coffee outlets in India. We believe that though the branded mineral water segment in India (~| 1200 crore in FY12 with penetration of ~10%, Source: MEMW Annual Report) remains small currently, the segment has huge potential led by the growing out of home dining culture. Further, TGBL’s JV with Starbucks provides further volume growth opportunity as
the JV provides for supply of Himalayan mineral water to Starbucks stores globally. Hence, we estimate the sales CAGR (FY13-16E) of 18.2% for MEMW to | 36.4 crore by FY16E.
Exhibit 32: MEMW revenues (| crore) trend
40
35 CAGR We expect the sales growth to accelerate as supplies to 18.2% Starbucks stores increase 30 25 36.4 20 30.0 24.8 22.8 22.0 22.0 15 20.1 21.2 18.9 10 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Source: Company, ICICIdirect.com Research
Apart from the mineral water segment, TGBL has entered the fortified water segment in FY13 through the launch of Tata Water Plus and Tata Gluco Plus. The company has launched these only in South Indian markets (Tamil Nadu and Andhra Pradesh) currently and is yet to launch it nationally. We believe the entry of TGBL into the functional water segment would yield results at a very slow pace as the segment is a niche concept and very small in India currently.
ICICI Securities Ltd | Retail Equity Research Page 17
Joint ventures to yield long term benefits… Starbucks JV: Ma’Star’ stroke by TGBL! TGBL entered into a 50:50 joint venture with Starbucks Coffee International Inc US, in FY12, to set up, own and operate Starbucks café’s across the country. The café’s will be branded as ‘Starbucks Coffee “A Tata Alliance”. The JV has also provided that all Starbucks stores in India would source the coffee from Tata Coffee Ltd (TCL, subsidiary of TGBL). TCL would also be supplying coffee to Starbucks stores in South East Asia, going ahead. Starbucks currently (Q1FY14) owns and operates 18 stores, nine in Mumbai and nine in Delhi. The stores are located in prime locations of the country and are spread over an area of 1500-4000 sq ft. With the company expanding its presence at a rapid pace, we expect TGBL to open ~42 stores by FY14E and ~92 stores by FY16E. Led by the brand strength of Starbucks across the globe and evolving café culture in the country, we expect the JV to achieve breakeven (EBITDA level) by FY16E.
Exhibit 33: Starbucks store in Mumbai Exhibit 34: Starbucks store in Delhi
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
NourishCo JV: Establishing itself in segments of tomorrow… TGBL has formed a 50:50 JV with PepsiCo Inc US, to handle the sales, marketing and distribution of Himalayan Natural mineral water and other water products capitalising on PepsiCo’s distribution network. We believe that though the fortified water segment is a niche and small category in India currently, it is one of the highest growing beverage categories in the US and other international markets. Hence, with TGBL’s early entry into the segment and partnering with giants like PepsiCo to benefit from their distribution network, the company would reap long term benefits. NourishCo’s portfolio comprises Himalayan, Tata Water Plus (pet/pouch packets) and Tata Gluco Plus as in FY13.
ICICI Securities Ltd | Retail Equity Research Page 18
Significant innovation to drive slowing growth With black tea being a highly penetrated beverage in India (~95%) and UK (~80%) and traditional coffee witnessing deceleration in growth in the US, we believe it is innovation (more variants and flavours) within these segments that would be the key revenue drivers for TGBL. Apart from aiding revenue growth, these innovations would provide support to margins also as they fall into the premium category of the value chain. The ease of innovation for TGBL would be helped by the company’s strong brand equity across geographies where it is present (Tetley – second largest tea brand globally, Tata Tea – market leader in India, Jemca - market leader in Czech Republic, EOC- strong presence in the US) and cross-selling of its brands and variants across geographies. For example, Tata Tea has successfully launched Tetley in India under the specialty and green tea segment and is witnessing ~50% YoY growth in these brands. Further, with a large Indian population in Canada, TGBL has launched the Tata Tea brand in Canada, which would further aid its revenues from the country. Hence, we believe that with TGBL’s vast portfolio of brands, ability to innovate and blend new flavours across beverages and launch them across the world markets, revenues would register 12.0% CAGR in FY13- 16E against 10.6% CAGR in FY08-13. Moreover, the shifting consumption towards specialty and gourmet tea and coffee would also improve margins from 10.5% in FY13 to 11.5% by FY16E.
Exhibit 35: Innovations in TGBL’s portfolio in FY12 & FY13 alone Brand New Launchs Geography Year Tetley Blend of both Uk FY13 Estate Selection UK FY13 Green Tea Plus Canada FY13 Herbal mocktails Canada FY13 The company is launching around four variants and flavours Tetley Tassimo single serve discs Canada FY13 across geographies every six months, garnering every bit of Chai Latte Australia FY13 the evolving market opportunity across tea and coffee Specialty Tea Australia FY13 Tata Tea Gold Pakistan FY13 Green Tea Mango and Passion Fruit Across the globe FY13 EOC k-cups USA FY13 Chocolate mint USA FY13 Grand Grand Melange Russia FY13 Grand Extra Russia FY12 Tata Tea Veda India FY12 Tata Waters Tata Water Plus India FY12 Tata Gluco Plus India FY12
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 19
Financials Revenues to grow at higher CAGR of 12.0% in FY13-16E Revenues have grown at a CAGR of 10.6% in FY08-13. We expect this to increase to 12.0% in FY13-16E. The increase would be driven by changing sales mix of tea (higher contribution of tea bags in domestic tea revenues, increasing contribution of specialty teas in Canada & UK markets), increasing innovations and launches in the premium tea categories, higher coffee revenues from TCL and increasing revenues from joint ventures. We estimate the tea revenues will grow at 7.6% CAGR in FY13- 16E compared to 9.2% in FY08-13. Coffee revenues are expected to maintain a high growth rate of 15.7% CAGR (FY13-16E) compared to 16.3% CAGR (FY08-13).
Exhibit 36: Revenues (| crore) and revenue growth (YoY in %)
12000 10808.1 25 9690.9 10000 8624.0 20 7233.3 8000 6552.8 5783.9 5983.9 15 6000 4367.1 4848.9 10 4000 2000 5 0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Revenues % increase
Source: Company, ICICIdirect.com Research
Margins to improve to 11.5% by FY16E EBITDA growth has remained strained at 1.5% CAGR in FY08-13 with margins falling from 16.2% in FY08 to 10.5% in FY13. The fall in margins was led by the significant increase in tea prices, which has increased the raw material cost to sales ratio from 32.4% in FY08 to 49.3% in FY13. We believe that though tea prices would continue to remain high, the change in sales mix and higher coffee revenues (higher margins segment) would mitigate the impact, improving margins to 11.5% by FY16E. We believe the JV business would start contributing to margins positively from FY16E onwards. Exhibit 37: EBITDA (| crore) and margins (% to sales)
1400 1289.0 18 1200 1118.1 16 945.9 14 1000 12 712.7 724.4 768.5 800 648.5 610.6 623.1 10 600 8 6 400 4 200 2 0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
EBITDA (| crore) EBITDA Margins (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 20
Reduction in interest cost, healthy margins to aid PAT growth TGBL witnessed a loss in FY08 and FY09 on the back of higher interest cost and tax expense. In FY10, the company reduced its debt through the sale of ‘Glaceau’ to Coca Cola (at a profit of $523 million), which reduced its interest cost and improved its profitability from thereon. We believe that with margins expected to improve from FY13 onwards and net debt on books being nil, TGBL’s earnings (adjusted PAT) would increase at an impressive rate of 15.7% CAGR in FY13-16E.
Exhibit 38: Profit before tax (PBT), adjusted PAT and interest cost (| crore) trend
1400 1230.9 250 1200 1072.4 200 1000 917.2 749.4 754.2 800 658.2 652.8 621.5 628.5 150 580.1 538.1 600 517.3 374.2 333.6 400.9 100 400 244.8 200 50 0 -200 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E 0 -79.8 -29.8
PBIT Adjusted PAT Interest Cost
Source: Company, ICICIdirect.com Research
Strong balance sheet Debt in FY13 stood at | 672.7 crore against cash of | 693 crore on the books. Hence, the net debt of the company is (| 20.3) crore. The debt to equity ratio (FY13) is at a comfortable level of 0.1x compared to 0.8x in FY08. The company has not paid its debt as it is seeking acquisitions. Hence, we believe the strong balance sheet of the company would provide it with greater flexibility to grow through the inorganic route, without straining its balance sheet and maintaining a comfortable debt to equity ratio, going ahead.
Exhibit 39: Debt-equity ratio trend
1 0.75 0.67 1 1 0.48 1 0 0 0.18 0.16 0 0.14 0.15 0.15 0.16 0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 21
Return ratios to improve with healthy earnings growth TGBL’s return ratios (on adjusted PAT) have improved over the years aided by improvement in earnings and reduction in debt. FY08 and FY09 reported net adjusted loss due to higher interest cost and consequent increase in debt, straining the RoE. In FY10, with the reduction in debt and improvement in earnings, the company witnessed a comeback in its RoE to 10%. With earnings set to witness higher growth (PBIT at 15.5% and adjusted PAT at 15.7% CAGR FY13-16E), going ahead, and no significant increase in debt, we expect the RoE (adjusted) and RoCE to improve to 11.2% and 13.4%, respectively by FY16E.
Exhibit 40: Return on equity and return on capital employed (%)
16 14 12 10 8 6 4 2 0 -2 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E -4
RoE (adjusted) RoCE
Source: Company, ICICIdirect.com Research
Exhibit 41: Return on capital employed from tea & coffee (%)
25
20
15
10
5
0 FY08 FY09 FY10 FY11 FY12 FY13
Tea Coffee
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 22
Risks & Concerns Slowdown in black tea market across geographies Black tea is witnessing a slowdown in consumption across key consumption geographies (India, UK). Though consumption is shifting towards specialty black tea and green tea, the rate of shift could be lower. Further, due to the premium pricing in specialty tea, we believe volume growth could remain lower. Input costs susceptible to higher commodity prices With TGBL’s business largely being marketing of branded tea and coffee, the company is susceptible to price fluctuations in tea and coffee. The significant increase in domestic tea prices in FY13 (~24% increase YoY) increased TGBL’s (standalone) RM cost to 66.4% (higher by ~200 bps), consequently pulling down margins by 110 bps to 10.3%. Similarly, in FY11, EOC sales de-grew ~5% YoY due to price increases taken by TGBL in order to pass on the increase in coffee prices (higher by ~36% YoY in FY11). Therefore, led by the due nature of TGBL’s business, commodity price concerns would continue to haunt TGBL’s revenues and margins. Higher brand building expenses may keep margins strained TGBL has been witnessing increasing competition across geographies, which has kept the company’s marketing expenses higher over the years. Marketing expenses have witnessed an increase of 7.9% CAGR in FY08- 13 ranging between 18% and 21% of net sales. We believe that with TGBL increasing brand building expenditure in the US (EOC), Russia (Grand) and Poland (Vitax) to increase market share and in India (water business) and UK (Tetley’s premium launches) to drive market growth, its marketing spends would increase at a higher CAGR of 9.3% from FY13-16E (18-19% of net sales). Though we expect margins to improve ~100 bps to 11.5% by FY16E in spite of higher marketing expense, we remain wary of the fact that any further increase in competition could drive marketing expenses higher, pulling down margins. Goodwill in balance sheet TGBL has a goodwill of | 3598.1 crore (FY13) on its books. The goodwill has been accumulated on account of the various acquisitions by the company over the years. We believe a possible impairment of this goodwill remains a key risk if the acquired brands fail to generate the expected growth. Slowdown in Starbucks store addition to impact sales growth We have estimated the higher revenue growth in TCL’s coffee business to be supported by higher supplies to Starbucks stores in India. Further, the growth in revenues of the others segment (102.8% FY13-16) of TGBL would constitute 80-90% revenues from sales through Starbucks stores. We have estimated that the company would open ~95 stores by FY16E. Hence, any slowdown or a significant downtrend in stores addition would adversely impact the revenue growth estimate for TCL and TGBL.
ICICI Securities Ltd | Retail Equity Research Page 23
Valuation We have valued TGBL on a sum of parts (SOTP) valuation methodology and arrived at a fair value of | 182/share. We have divided the overall business into four sub parts, TGBL (standalone), Tata Coffee (consolidated), Mount Everest Mineral Water and Tata Global (other subsidiaries). With Tata Coffee and MEMW being listed subsidiaries in India, we have valued them individually and assigned the contribution of each proportionately to TGBL’s share price.
Exhibit 42: SOTP Valuation
TGBL (Standalone) Sales FY15E 2914.8 Multiple 2.0 Mcap 5829.6 Propotionate Mcap 5829.6 No. of Shares 61.8 Value/share 94.3 Tata Coffee (Consolidated) EBITDA FY15E 374.2 EBITDA Multiple 5.0 EV 1870.8 Debt (FY15E) 125.1 Cash (FY15E) 15.4 Target Mcap 1761.1 Propotionate Mcap (57.5% Stake) 1012.3 No. of Shares 61.8 Value/share 16.4 MEMW Current Market Cap 458.9 Discount (%) 25% Mcap (FY15E) 344.2 TGBL's propotionate 172.3 No. of shares 61.8 Value/share 2.8 TGBL (other subsidiaries) Sales FY15E 4362.5 Multiple 1 Mcap 4798.7 Propotionate Mcap 4254.1 No. of Shares 61.8 Value/share 68.8 Target Price 182.2 Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 24
EV/EBITDA Valuation Over the past eight years, TGBL has traded in the average range of 8-10x two year forward EV/EBITDA multiple. At the CMP, it is trading at lower band of its historic range at 8.6x FY15E EBITDA/share. At the target price of | 182, the two-year forward multiple would be 10.2x FY15E EBITDA/share. We believe the increase in multiple would be on account of improving margins led by change in product mix in both tea and coffee and reduction in the losses from the JV businesses.
Exhibit 43: Two-year forward EV/EBITDA
14,000 12,000 10,000 8,000 6,000 EV (Rs Cr) 4,000 2,000 0 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12
EV 10x 8x 6x 4x
Source: Company, ICICIdirect.com Research
Price to sales valuation At the CMP of | 146, the stock is trading at 1x its FY15E and 0.9x its FY16E sales per share of | 150 and | 164.4, respectively. At our target price of | 182, the two-year forward multiple would be 1.1x its FY15E price/sales. The increase in multiple would be supported by the increasing contribution of specialty and premium tea in the company’s portfolio and higher revenues from the coffee segment.
Exhibit 44: Market capitalisation to sales ratio (two years forward)
200
160
120
80
40
0 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
Close (|) 0.8x 1x 1.2x 1.4x
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 25
Price/earnings valuation At the CMP of |146, the stock is trading at 16.4x its FY15E and 14.6x its FY16E EPS of | 8.9 and | 10, respectively. Historically, the stock has traded in the range of 12-18x its two-year forward earnings. At the assigned target price of | 182, the two year forward P/E multiple would be 18.2x FY15E EPS.
Exhibit 45: Price/earnings ratio (two years forward)
200
160
120
80
40
0 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12
Close (|) 12x 14x 16x 18x
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 26
Tables
Exhibit 46: Profit & Loss Account (Consolidated)
(| Crore) (Year-end March) FY12 FY13 FY14E FY15E FY16E Net Sales 6,551.1 7,232.4 8,375.5 9,276.6 10,163.4 Other Operating Income 89.0 118.6 122.9 126.2 128.6 Total Operating Income 6,640.0 7,351.0 8,498.4 9,402.7 10,292.0
Raw Material Expenses 3,321.3 3,567.0 4,050.8 4,469.6 4,927.4 Power & Fuel 79.6 85.2 100.5 104.4 111.8 Manufacturing Expenses 124.5 136.2 146.6 167.0 167.7 Employee Expenses 681.3 740.1 845.9 941.6 1,041.7 Marketing Expenses 1,217.9 1,387.1 1,608.1 1,734.7 1,809.1 Administrative Expenses 293.0 304.9 376.9 440.6 508.2 Miscellaneous Expenses 299.3 361.9 427.2 482.4 538.7 Total Operating Expenditure 6,017.0 6,582.5 7,556.0 8,340.3 9,104.6 EBITDA 623.1 768.5 942.4 1,062.4 1,187.4 Interest 70.4 84.4 85.0 91.6 97.3 Other Income 94.5 86.0 85.3 88.4 90.2 PBDT 647.2 770.1 942.7 1,059.1 1,180.4 Depreciation 96.1 105.1 117.2 136.3 156.5 Less: Exceptional Items (22.5) 28.2 - - - PBT 573.6 636.8 825.6 922.8 1,024.0 Total Tax 141.7 164.1 247.7 276.8 307.2 PAT before MI 431.9 472.7 577.9 646.0 716.8 Minority Interest 60.7 72.3 72.3 72.3 72.3 PAT after MI 371.3 400.4 505.6 573.7 644.5 Adjusted PAT 339.2 393.7 479.3 548.7 620.7 EPS (Adjusted) 5.5 6.4 7.8 8.9 10.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 27
Exhibit 47: Balance Sheet (Consolidated)
(| Crore) (Year-end March) FY12 FY13 FY14E FY15E FY16E Equity Capital 61.8 61.8 61.8 61.8 61.8 Reserve and Surplus 4,503.9 4,748.3 5,070.1 5,461.2 5,924.4 Total Shareholders funds 4,565.8 4,810.2 5,131.9 5,523.1 5,986.3 LT Borrowings 739.3 672.7 772.7 872.7 972.7 Total Debt 739.3 672.7 772.7 872.7 972.7 Deferred Tax Liability 65.7 54.0 54.0 54.0 54.0 Minority Interest 1,065.9 813.9 886.2 958.5 1,030.8 Other Non Current Liabilities 155.8 92.4 92.4 92.4 92.4 LT Provisions 174.0 203.2 203.2 203.2 203.2 Total Liabilities 6,766.5 6,646.3 7,140.4 7,703.8 8,339.3
Total Gross Block 5,233.9 5,508.1 5,858.1 6,058.1 6,258.1 Less Total Accumulated Depreciation 988.0 1,069.0 1,186.2 1,322.5 1,478.9 Net Block 4,246.0 4,439.1 4,671.9 4,735.6 4,779.1 Total CWIP 49.2 90.7 150.2 100.2 100.2 Total Fixed Assets 4,295.1 4,529.7 4,822.1 4,835.7 4,879.3 Other Investments 473.5 576.0 626.0 676.0 726.0
Inventory 1,160.7 1,382.9 1,528.3 1,702.8 1,893.5 Debtors 651.8 712.9 821.5 914.9 1,002.4 Loans and Advances 734.4 792.4 795.7 881.3 965.5 Other Current Assets 17.1 21.3 25.1 27.8 30.5 Cash 731.6 693.0 429.2 709.2 1,016.6 Current Investments 93.0 1.9 1.7 1.9 2.0 Total Current Assets 3,388.6 3,604.5 3,601.4 4,238.0 4,910.5 - - - - - Creditors 805.2 803.4 917.9 965.8 1,002.4 Provisions 263.6 310.0 321.3 338.0 350.8 ST Borrowings 148.9 344.1 418.8 463.8 467.5 Other CL 294.6 690.2 335.0 371.1 457.4 Total Current Liabilities 1,512.3 2,147.6 1,992.9 2,138.7 2,278.1 Net Current Assets 1,876.3 1,456.9 1,608.5 2,099.3 2,632.4 LT Loans & Advances 88.3 83.6 83.8 92.8 101.6 Other Non CA 33.3 - - - - Total Assets 6,766.5 6,646.3 7,140.4 7,703.8 8,339.3
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 28
Exhibit 48: Cash Flow Statement (Consolidated)
(| Crore) (Year-end March) FY12 FY13 FY14E FY15E FY16E Profit after Tax 356.2 372.8 479.3 548.7 620.7 Add: Depreciation 96.1 105.1 117.2 136.3 156.5 Add: Interest Paid 70.4 84.4 85.0 91.6 97.3 CF before WC changes 522.7 562.3 681.5 776.7 874.5 Changes in inventory (91.1) (222.2) (145.3) (174.6) (190.6) Changes in debtors (78.6) (61.1) (108.6) (93.5) (87.5) Changes in loans & advances (108.0) (58.1) (3.3) (85.6) (84.2) Changes in other CA (3.6) (4.2) (3.8) (2.7) (2.7) Changes in Current Investments 13.5 91.1 0.2 (0.2) (0.2) Net Increase in CA (267.7) (254.5) (260.7) (356.5) (365.2) Change in creditors (24.8) (1.9) 114.5 47.9 36.6 Change in provisions 3.9 46.4 11.3 16.8 12.8 Change in ST borrowings (149.6) 195.2 74.6 45.1 3.7 Changes in other CL 22.5 395.6 (355.1) 36.0 86.3 Net Increase in CL (148.1) 635.3 (154.7) 145.8 139.4 Net CF from operations 106.9 943.1 266.0 565.9 648.7 Change in LT loans & advances 2.8 4.6 (0.1) (9.0) (8.9) Change in Non CA (29.1) 33.3 - - - Change in other investments 6.4 (102.5) (50.0) (50.0) (50.0) Change in FA (588.7) (339.7) (409.5) (150.0) (200.0) Change in deferred tax liability 2.0 (11.8) - - - Change in minority interest (42.2) (252.0) 72.3 72.3 72.3 Change in other non CL (8.2) (63.4) - - - Change in LT provisions 85.7 29.2 - - - Net CF from Investing activities (571.3) (702.2) (387.3) (136.7) (186.6) Proceeds from Equity Capital 0.1 - - - - Proceeds from LT borrowings 16.5 (66.6) 100.0 100.0 100.0 Payment of dividends (157.0) (157.5) (157.6) (157.6) (157.6) Interest Paid (70.4) (84.4) (85.0) (91.6) (97.3) Adj in General Reserve 7.1 0.3 - - - Adj in Revaluation reserve (2.3) 1.4 - - - Adj in Statutory Reserve - (0.3) - - - Acturial Gain/(Loss) Reserve (70.7) (27.0) - - - Exchange Rate Fluctuation 465.1 30.9 - - - Contingency Reserve 10.2 23.8 - - - Net CF from Financing activities 198.6 (279.5) (142.6) (149.2) (154.8) Net Cash Flow (265.7) (38.6) (263.8) 280.0 307.3 Opening Cash 997.3 731.6 693.0 429.2 709.2 Closing Cash 731.6 693.0 429.2 709.2 1,016.6
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 29
Exhibit 49: Ratio Analysis
(Year-end March) FY12 FY13 FY14E FY15E FY16E Per Share Data EPS 5.8 6.0 7.8 8.9 10.0 Cash EPS 7.3 7.7 9.6 11.1 12.6 Cash per Share 11.8 11.2 6.9 11.5 16.4 Revenue per Share 105.9 117.0 135.4 150.0 164.4 Operating profit per share 10.1 12.4 15.2 17.2 19.2 DPS 2.1 2.1 2.2 2.2 2.2
Operating Ratios EBITDA / Total Operating Income 9.4 10.5 11.1 11.3 11.5 PAT / Net Sales 5.4 5.2 5.7 5.9 6.1
Return Ratios RoE 7.8 7.7 9.3 9.9 10.4 RoCE 8.3 10.5 12.2 12.6 12.9 RoIC 8.9 11.3 12.5 13.4 14.3 RoA 5.3 5.6 6.7 7.1 7.4
Valuation Ratios P/E 25.3 24.2 18.8 16.5 14.5 Target P/E 30.0 28.7 22.3 19.5 17.2 Market Cap / Sales 1.4 1.2 1.1 1.0 0.9 Target Market Cap / Sales 1.6 1.5 1.3 1.2 1.1 EV / EBITDA 14.5 11.7 9.9 8.7 7.6 EV / Net Sales 1.4 1.2 1.1 1.0 0.9 Dividend yield 1.5 1.5 1.5 1.5 1.5
Solvency Ratios Debt / Equity 0.2 0.1 0.2 0.2 0.2 Interest coverage 7.5 7.9 9.7 10.1 10.6 Current Ratio 2.2 1.7 1.8 2.0 2.2 Quick Ratio 1.5 1.0 1.0 1.2 1.3 - - - - - Turnover Ratios Asset turnover 1.0 1.1 1.2 1.2 1.3 Debtors Turnover Ratio 10.1 10.1 10.2 10.1 10.1 Creditors Turnover Ratio 8.1 9.0 9.1 9.6 10.1 Inventory Turnover 5.9 5.7 5.8 5.7 5.7
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 30
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: > 10%/ 15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093
ANALYST CERTIFICATION We /I, Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc. Disclosures: ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business.
ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.
It is confirmed that Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
ICICI Securities Ltd | Retail Equity Research Page 31