Tata Consumer Products: A tale of two halves with ‘growth businesses’ packing a punch | Stock Market News
Tata Consumer Products Ltd's (TCPL) ‘growth businesses’ stole the show in the June quarter (Q1FY27), clocking 47% year-on-year (y-o-y) revenue growth to ₹1,314 crore and scaling to 36% of its India business from 31% in FY26. This segment is now bigger than India salt and India tea/coffee revenues.
"TCPL is a tale of two halves: legacy tea/salt segments growing in seasonal/cyclical trajectories, and the new growth businesses—Sampann, Soulfull, ready-to-drink (RTD) waters, Capital Foods/Organic India—delivering the alpha," said Systematix Shares and Stocks (India).
Within the growth portfolio, Tata Sampann saw 58% growth, aided by strong demand across pulses, spices, dry fruits and cold-pressed oils. RTD climbed 41%, Capital Foods by 40%, and Organic India by 27%. The management expects ‘growth businesses’ to grow around 25-30% in the medium-term.
Tata Consumer’s India tea/coffee volumes grew by 2%, but revenues fell 4% to ₹1,234 crore as lower tea prices were passed on to consumers. Coffee revenues, however, grew 24%. India salt revenue rose 7% to ₹1,090 crore, led by 7% volume growth, despite price hikes to fight input cost inflation. Value-added salts outperformed, clocking 13% volume growth.
International revenues grew 16%, and 3% in constant currency (CC); US saw 7% CC growth, Canada revenue was flat, while UK revenue fell by 2% in CC terms. Non-branded segment was weak; revenue fell 7% and 10% in CC terms, as average Robusta coffee prices declined 26%, hurting realizations.
Overall, consolidated revenue rose 12% y-o-y to ₹5,349 crore, while Ebitda margin rose 70 basis points (bps) to 13.5%. India business delivered an underlying volume growth of a healthy 13%.
Tata Starbucks (JV) posted 11% revenue growth, supported by mid-single-digit same-store sales growth.
Tata Consumer management has guided for 50-70 bps Ebitda margin expansion in FY27. ICICI Securities expects margin to benefit from full realizations of recent price hikes, cost efficiencies, and easing coffee costs, supporting management guidance towards margin expansion in FY27, partly offset by RM inflation and elevated A&P.
The stock trades at about 54x estimated FY27 earnings, as per Bloomberg consensus.
Systematix expects Tata Sampann, which generated about ₹1,600 crore in FY26 sales, to remain the company's key growth engine, with categories such as pulses and spices continuing to drive strong double-digit growth.
"We also like the near/medium-term margin construct," it said, adding, “However, downside risks to growth cannot be ignored - as the key growth portfolios scale, any deceleration would make current valuations vulnerable.”
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