Tata Consumer Products delivered a strong quarterly performance across most parameters, led by solid growth and margin expansion in its India business, according to a note from Jefferies. The brokerage has maintained a 'Hold' rating on the stock, citing confidence in India-led growth and improving profitability, even as some categories and geographies remain under pressure.
Jefferies has retained a price target of Rs 1,310, implying about 10% upside from current levels, and continues to view Tata Consumer as a steady compounder, albeit with near-term valuation already pricing in much of the India-led optimism.
Jefferies said Tata Consumer's India business reported underlying volume growth (UVG) of 15%, driven largely by strong traction in salt, while packaged tea continued to lag. Growth categories such as Sampann and NourishCo remained standout performers, helping the company's portfolio cross the Rs 1,000 crore revenue milestone during the quarter.
Revenue, EBITDA Beat Estimates
Overall revenue rose 15% year-on-year, slightly ahead of Jefferies' expectations. India branded UVG also came in at a similar level. Operating performance was notably stronger, with EBITDA rising 28% YoY to Rs 720 crore, supported by margin expansion in the India business. Pre-exception earnings grew a sharp 44% YoY, reflecting both operating leverage and improved cost dynamics.
Jefferies noted that the management sounded confident on sustaining growth and profitability, particularly in the domestic market.
India Beverages and Foods: Mixed but Improving
In India beverages, packaged beverages posted 3% growth, entirely volume-led, aided by lower tea prices. NourishCo volumes surged 27% YoY, marking the seventh consecutive quarter of growth. Coffee remained a bright spot, with 40% YoY revenue growth, although pricing-led.
In India foods, organic revenue grew 21% YoY, while reported growth stood at 19% including acquisitions. Salt volumes rose 15% YoY, supported by targeted consumer actions and trade promotions in select markets. Sampann continued to outperform, posting 45% YoY growth, while Capital Foods saw more modest 10% growth.
Growth Portfolio Crosses Key Milestone
Jefferies highlighted that Tata Consumer's growth portfolio expanded 29% YoY and crossed Rs 1,000 crore in quarterly revenue for the first time. The portfolio now contributes around 30% of India business revenues, with Sampann leading performance, followed by NourishCo.
Management reiterated its go-to-market (GTM) strategy, which focuses on category-led sales teams, differentiated routes to market, and sharper execution across salt, core, and growth segments. The strategy has already been rolled out in about 80% of target markets, according to the brokerage.
Margins Expand in India, Pressure Overseas
India EBITDA margins expanded by over 450 basis points YoY, largely due to lower tea prices. The company has passed on most of the tea price correction to consumers, though Jefferies noted that some price reductions may still flow through in the near term.
Internationally, while sales grew 18% YoY, EBITDA margins contracted by around 160 basis points, driven by elevated coffee prices. The US posted strong 31% growth, while the UK was flat and Canada saw a mid-single-digit revenue decline. Jefferies expects overseas margins to normalise over the next quarter or two as coffee costs moderate.
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