Tata Global Beverages Ltd - Research Report

Private Client Research






Tata Global Beverages Ltd


May 31, 2019

Sensex: 39714.20

CNX Nifty: 11922.80


BSE: 500800

Reco Price
Rs. 245.20
Price Target (1 Year)
Rs. 295


May 31, 2019



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
284.50 - 177.05
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Tata Global Beverages Ltd Sensex
Tata Global Beverages Ltd
Return (%)


(in %)

+91 22 6639 3000



Tata Global Beverages focuses on branded natural beverages — tea, coffee and water. With a long history and experience in the beverages market, and a heritage of innovation and development, the Company has evolved from a predominantly domestic Indian tea farming entity to a marketing and brand-focused global organization. Tata Global Beverages Limited is a beverage company engaged in the trading, production and distribution of tea, coffee and water. The Company's principal activities include processing and blending of tea, including manufacture of instant tea. The Company's segments include Tea, which is engaged in the cultivation, manufacture, blending and sale of tea in packet, bulk or value added forms; Coffee and Other Produce, which is engaged in the cultivation of coffee and related plantation crops, and sale of coffee in various value added forms, and Others, which includes sale of water products and other businesses. Its Tata Tea brands include Tata Tea Premium, Tata Tea Gold, Tata Tea Life, Tata Tea Agni, Tata Tea Chakra Gold, Tata Tea Kannan Devan and Tata Tea Gemini. It has branded beverage business operations mainly in India, Europe, the United States, Canada and Australia, plantation business in India/Sri Lanka and extraction business mainly in India, the United States and China.

Tea and Coffee continue to remain most preferable & durable beverage choice globally.

Investment Rationale:

Huge market share in Tea segment:
TGBL is been consistently having a huge chunk of market share in tea segment. Currently TGBL has 20% market share in branded tea segment in India. TGBL continues to retain this market share as well as it expects it to increase in upcoming years with the help of new product launches, and increased reach of their premium products such as Chakra gold, Activ+, Tata gold etc. Company has now also started new initiatives such as providing out of home tea stores named TATA Cha, it has opened till date 6 stores in Bangalore.

New product launches in branded category:
TGBL’s 90% revenues comprises from banded category. TGBL’s Tetley is the oldest and well known tea brand globally. TGBL recently launched Tetley super teas in Canada. Tetley super teas are fortified with vitamins and minerals. This product was also able to gain market share of 1.6% of non black tea quickly. While in UK TGBL’s Tetley launched cold infusion products which can be brewed with cold water. TGBL is focused in innovations of its branded product portfolio. Tetley continues to expand its portfolio in non black tea by launching excited products.

Tata Global Beverages Ltd

Source: Company, Stockaxis Research

Merger will lead to unlock synergies:
TGBL and Tata Chemicals (TCL) have entered into an agreement to merge TCL’s consumer products business into TGBL in an all-stock transaction. Where the swap ratio is for every one share of Tata chemicals limited, TGBL will issue 1.14 shares. This will lead to issue 246 mn fresh issue of equity which suggests around 46% of equity dilution. TCL’s consumer products business portfolio includes TATA salt, blended spices, pulses, ready to eat mixed and other nutrition products. After the merger company would be renamed as TATA consumer products limited (TCPL). This merger will help in widening distribution reach for their consumer products.

Tata Global Beverages Ltd

Source: Company, Stockaxis Research

With the help of this merger it will become a major FMCG player in market. This transaction will make company more India centric. Management is expecting to launch new products and expand its product portfolio by entering into new segments. As per management now from basic products they are going to enter in value added products.

Tata Global Beverages Ltd

Source: Company, Stockaxis Research

Strategic JV’s, Associations and Inorganic growth:
TGBL has currently to JV’s i.e. Starbucks a 50:50 JV, & Nourishco a 50:50 JV with PepsiCo India company. While Starbucks is really doing good For FY19 its topline grew by 30% and it added 15 new stores in same financial year. The store count for starbucks till date stood at 146 stores. While nourishco’s top line grew by 10%. Its product tata gluco plus got good traction and it posted double digit growth for FY19.

TGBL is been ahead in inorganic growth. TGBL has done quite acquisitions previously and been able to run those companies efficiently. Recently TGBL had acquired Dhunseri tea & industries Limited for the amount of 101 crores. Dhunseri tea has 2 major brands i.e. Lal ghoda and Kala Ghoda tea which has 6% market share in Rajasthan. This acquisition enables TGBL to enter markets of rajasthan. As there are quite local players having large chunk of market share.

Eight o Clock (EOC) business to boost coffee business:
Tata coffee is a wholly owned subsidiary of TGBL. Tata coffee has started its Freeze-dried coffee plant in vietnem, which will lead to boost its B2B coffee sales. In last year it also launched two blends in it. Due to floods in kerala its domestic business was affected in FY19. We expect that it would recover in FY20 and record higher top line growth.


Tea Industry In India:
Indian tea is among the finest in the world owing to strong geographical indications, heavy investments in tea processing units, continuous innovation, augmented product mix and strategic market expansion. The main tea-growing regions are in Northeast India (including Assam) and in north Bengal (Darjeeling district and the Dooars region). Tea is also grown on a large scale in the Nilgiris in south India. India is one of the world’s largest consumers of tea, with about three-fourths of the country’s total produce consumed locally. Euromonitor estimates that the Hot tea category (excluding Ready-to-Drink) is a ~US$44billion industry; projected to grow at a CAGR of 5% between 2019 and 2023. Black/ Everyday Black tea forms the largest category sub-segment globally, accounting for ~42% of sales (by value) followed by Non-Black tea like Green, Fruit & Herbal, Rooibos, Decaf, etc. However, Non-Black tea commands a much higher value-perserve in comparison to Black tea. The Indian tea industry will see broad-based growth from unbranded as well as branded business, while more consumers shift to premium products. However, Everyday Black tea category in the developed markets will reflect a declining trend mainly due to change in consumer preference.

Important Facts regarding tea industry:

  • Tea exports from India stood at US$ 837.33 million in 2017-18.
  • Indian tea market turnover is Rs 10,000 Cr.
  • India stands at 2nd in the world in tea production
  • India has been producing tea for the last 150 years
  • Assam – A small State produces more than 50 percent of India’s tea alone
  • Assam also produces’ 16 percent of the world’s total tea.

Growth Drivers for Tea Industry:

  • Urbanisation Rural per capita consumption in India will grow faster than its urban counterpart, emulating urban consumption patterns, as metros and emerging towns drive economic growth.
  • Favourable Demographics India’s median age strongly indicates that it will remain one of the youngest nations in the world with one of the largest working-age populations.
  • Premiumisation and Convenience World over, there is discernible shift in preferences towards premium products, with a conscious choice for healthier ‘good-for-you’ products. Convenience also continues to play a key role in international markets. Young consumers increasingly seek interesting flavours and functional benefits from their teas.
  • Out-of-home Channels New quick-service restaurant concepts are steadily gaining ground in consumer mindsets across the globe; offering a niche variety of innovative meal and beverage options.

Source: Company, IBEF, Euromonitor.

Coffee Industry In India:
In India, coffee is grown in regions that receive 2,500–4,000mm rainfall across more than 100 days, followed by a continuous dry period of a similar duration. Coffee growing areas in the country have diverse climatic conditions, which are suitable for the cultivation of different varieties of coffee. Globally, with a total size of US$85 billion, the coffee industry is much larger than the tea industry. Coffee has been able to better leverage premiumisation and is growing faster than tea, with a rise in out-of-home consumption at retail outlets (e.g. Starbucks and Costa) and a greater adoption of technology to recreate café experiences at home (e.g. Nespresso). Coffee is also the favourite beverage in most developed countries where affordability does not constrain consumption, as compared to tea which is the preferred beverage in developing countries. The coffee industry has lately seen a wave of consolidation driven by leading players like Nestle and JAB, across geographies.

Important Facts regarding coffee industry:

  • India is the third-largest producer and exporter of coffee in Asia, The country accounts for 3.30 per cent (2017-18) of the global coffee production.
  • The coffee production in FY18 is stood at 316,000 MT.
  • In FY18, coffee exports from India stood at 395,014 MT valued at US$ 963.28 million.
  • Top three importers of Indian coffee during 2017-18 were Italy (25.16 per cent), Germany (10.51 per cent) and Belgium (5.97 per cent).
  • Of the total coffee produced in India, ~70 per cent is exported and ~30 per cent is consumed domestically.

Growth Drivers for coffee Industry:

  • Maturing Coffee Preferences Coffee drinkers in developed markets seek to celebrate coffee for its unique flavours and specific origins. This transition is also attributed to the younger population who are more likely to consume out of home. In the US, market growth is being led by: (a) premium or quick-service brands (e.g. Starbucks and Dunkin Donut) who are over-investing in promotions and discounts; (b) small niche brands who are capitalising on the trend towards artisanal, single-origin coffees and (c) private label-retailers who are looking at improving their margins and providing consumers with ‘value for money’ offerings.
  • Sustainable Sourcing There is also an increased emphasis on sustainable methods of roasting and brewing, on the relationship of the farmer to the coffee industry and on the desire to inform coffee drinkers on where their coffee is sourced from and how it got to where they are.

Source: Company, IBEF, Euromonitor.

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

DESCRIPTION Mar-17 Mar-18 Mar-19 Mar-20 E Mar-21 E
Net Sales 6780.00 6815.00 7252.00 7832.00 8458.00
% Growth 2.20% 0.50% 6.40% 8.00% 8.00%
Raw Material Cost 3248.00 3416.00 3726.00 3916.00 4314.00
% Growth -1.50% 5.20% 9.10% 5.10% 10.20%
Employee Cost 835.00 821.00 806.00 839.00 872.00
% Growth 3.70% -1.60% -1.80% 4.00% 4.00%
General and Administration Expenses 199.00 189.00 229.00 235.00 254.00
% Growth -1.10% -5.40% 21.30% 2.70% 8.00%
Selling and Distribution Expenses 728.00 669.00 739.00 940.00 1015.00
% Growth 0.90% -8.00% 10.50% 27.10% 8.00%
Other Expenses 978.00 881.00 965.00 1018.00 1100.00
Total Expenditure 5988.00 5976.00 6466.00 6947.00 7554.00
EBITDA (Excl OI) 791.00 839.00 786.00 884.00 904.00
Growth(%) 20.90% 6.00% -6.30% 12.50% 2.20%
EBITDA Margins(%) 11.70% 12.30% 10.80% 11.30% 10.70%
Depreciation 126.00 116.00 123.00 129.00 135.00
Other Income 83.00 94.00 157.00 165.00 173.00
EBIT 748.00 817.00 820.00 921.00 942.00
Interest 92.00 43.00 52.00 60.00 58.00
Exceptional Income / Expenses 5.00 -21.00 -33.00 0.00 0.00
Profit Before Tax 662.00 753.00 735.00 860.00 884.00
Provision for Tax 198.00 186.00 261.00 301.00 310.00
Profit After Tax 464.00 567.00 474.00 559.00 575.00
PATM (%) 6.80% 8.30% 6.50% 7.10% 6.80%
Earnings Per Share 6.20 7.90 6.50 8.90 9.10
Adjusted EPS 6.20 7.90 6.50 8.90 9.10
Source: Stockaxis Research, Company Data


TGBL is a flagship company of TATA group; TGBL has a wide geographical reach and has a huge diversified business. We expect that merger will help in unlock synergies such as expanding distribution reach, operational efficiencies etc. Currently the stock trades at 37.8x TTM PE. We assign a TP of 295 based on 32.41x FY21E EPS.