Can Tata Consumer Products become a Multibagger stock?

Analysis of Tata Consumer Products Ltd

Introduction

Tata Consumer Products will now be the Fifth Tata Group Company to make a place in NIFTY 50. Tata Consumer Products  will take entry into the benchmark NIFTY on 31^st March 2021 by replacing GAIL. Also, TCPL will become the fifth FMCG stock in NIFTY 50 joining the existing FMCG players like ITC, HUL, Britannia and Nestle.

Analysis of Tata Consumer Products Ltd

Entry into NIFTY 50

• Stock Price touched the level its all-time high level of Rs. 652.85.
• The weightage of Tata Group Stock will increase to 8.75% from current weightage of 8.15%.
• With inclusion in Nifty 50, it may result in passive inflows of Rs.700 crores to Rs. 800 crores in Tata Consumer, where as outflow of Rs. 400 crores+ is expected in GAIL.

Business Model of TCPL

• The major focus of TCPL business is categorized in 3 divisions namely, ‘In the Kitchen’, On the Go, ‘On the Table’.
• ‘In the Kitchen’ segment involves its household products like Tata Salt, Tata Sampann, etc. Company is focusing on this segment via innovating new products, high promotion of existing products, etc.
• To expand product portfolio w.r.t its  ‘On the Go’ & ‘On the table’ segment, TCPL has recently acquired Kottaram Agro Foods for Rs.156 crores. It owns “Soulful” brand ,engaged in the business of breakfast cereals and millet-based snacks.
• The total outlet reach of this brand was 15,000. On the other hand, TCPL has reach of over 2.4 million outlets. This acquisition can yield high synergies. This is because even after being a small scale business, Soulful managed to reach to 15,000 outlets. So the same brand can generate heavy revenue for the firm by reaching out to their 2.4 million outlets.
• From viewpoint of FMCG, total size of ‘On the Go’ & ‘On the Table Industry’, is estimated to be around Rs. 20,000 crores.
• With presence of organic growth available in the market for FMCG sector, TCPL may also efficiently utilize the Brand Name of Tata to push more for Inorganic Growth.

Changes in Management Personnel

• Company recently appointed Mr Sunil D’Souza as its MD&CEO , Mr Sunil D’Souza is the alumni of IIM Calcutta and has years of experience of handling FMCG companies like HUL and Pepsi Co.
• Before starting his stint with Tata Consumer Products, Mr D’Souza was working with Whirlpool as an MD.
• Thus, he has rich experience of handling consumer oriented companies which will be useful for handling Tata Consumer Products, especially after the merger of Tata Global Beverages and Tata Chemicals.

Rejig in Distribution Channel and Increasing Network

• Company is focusing really hard on their market reach. For the same reason, TCPL has altered its distribution channel.
• To build a strong base in Rural area, Company has increased their products representative by three times.
• By increasing market reach, and with rise in volume, operating leverage will also provide great support to the profitability.
• The company has already improved their profit margin by 3%-4% and with improvement in operating leverage, margin can further increase by 3%-4%. Such revisions in margins will definitely have a good impact on profitability.
• The company has also taken the full benefit of opportunities that were made available during the pandemic, Company has come up with new products, re-branding of existing products and several other steps.
• Star Bazaar, the retail venture of TCPL is also functioning well and management has also planned to allot a section of TCPL products in every star bazaar. This step will certainly affect their sales in positive manner.

Conclusion

Keeping in mind the retail market opportunity in India, Tata Consumer has a huge prospect to grow their business. With the clear vision and efficient management, TCPL can perform well in the future and therefore this stock should be in investor’s radar. However this is not any direct advice to invest in the stock, one should do detailed research before taking investing decision.