TATACONSUM - TATA CONSUMER PRODUCTS LIMITED Share Price

Management's outlook for Tata Consumer Products Limited reflects a robust performance with significant revenue growth and strategic priorities for the upcoming fiscal year. In Q4 FY '25, the company achieved a revenue increase of 17%, with organic revenue growth at 12%. For the full year, the overall organic revenue growth stood at 9%, reaching INR 17,600 crores, and EBITDA increased to INR 2,500 crores. However, there was a decline in consolidated EBITDA margins due to higher input costs, notably in tea and coffee.

Key forward-looking points highlighted by management include:

1. Innovation and Product Launches: The company launched 41 new products in FY '25, including new flavors and categories in food and beverages. They are confident that the growth of their new businesses, which accounted for 28% of the India business and grew 66%, will continue.
2. Focus on Profitability: While facing increased tea prices, the management noted that they passed on approximately 30% of these costs to consumers. They expect to recover more of these costs through pricing strategies, aiming for a return to normalized EBITDA margins, projected around 15% by Q2 FY '26.
3. Strengthened Presence in Growth Markets: Management indicated strong growth in modern trade (up 26%) and e-commerce (up 66%), with plans to further expand distribution and product presence in these channels.
4. Strategic Goals for Capital Foods and Organic India: The integration of these businesses is expected to achieve a 30% growth trajectory, with margins near business case expectations being nearly realized.
5. Future Expectations: The management anticipates mid-single-digit growth in core categories like tea and salt, with continued innovation and channel expansion designed to capture more market share and improve profitability.

Overall, Tata Consumer Products remains optimistic, leveraging innovation, distribution, and strategic pricing to navigate current market challenges.

Question from Arnab Mitra (Goldman Sachs): "How do you see Capital Foods and Organic India business grow in FY26 now that the integration has been completed? Can we expect the 30% growth rate originally aspired?"

Answer: "Regarding margins, we've secured most of the expected benefits and achieved target gross margins. On revenue, we are confident of achieving that 30% growth, though we're slightly behind schedule. The key now is to enhance distribution and portfolio as we leverage our marketing efforts."

Question from Sheela Rathi (Morgan Stanley): "What is driving the improvement in net working capital cycle to one day, especially concerning e-commerce?"

Answer: "E-commerce, including quick commerce, stands at about 14-15% of our business. Significant backend investments in technology and infrastructure have helped align our inventories efficiently. We've implemented multiple measures to sustain this performance, ensuring it's not a one-off situation."

Question from Mihir P Shah (Nomura): "How do you view the unbranded coffee business with respect to crop patterns and pricing?"

Answer: "Predicting coffee prices is tough, but Brazil and Vietnam's crop forecasts appear lower this year, which may affect pricing. We will react based on market conditions. Our plantations are more impacted by pricing, while extractions are pass-throughs with limited margin exposure."

Question from Jitendra Arora (ICICI Prudential): "How has the export revenue of Organic India and Capital Foods grown?"

Answer: "Exports for Organic India account for about 40% of its revenue. The INR90 crores revenue includes contributions from our key international markets, while Capital Foods sees about 15% of total revenue from exports, performing in line with our growth expectations."

Question from Bhavdeep Vora (Franklin Templeton): "What explains the sequential margin dip in the international business, and what should be considered sustainable margin levels?"

Answer: "The margin dip arose from a deliberate choice regarding US coffee pricing amidst volatility, with a price increase set to take effect shortly. Resetting investment levels in the UK has also impacted margins temporarily. We anticipate recovery in margins with price adjustments."

Question from Sumant Kumar (Motilal Oswal): "What is the geographical distribution of NourishCo's revenue and the expansion plan?"

Answer: "Currently, around 35-40% of NourishCo's revenue comes from Andhra and Telangana. Our plan is to intensify presence in existing markets rather than expand into new states as there's considerable room for growth within our current operational areas."