 "Tata Consumer dips 2% after withdrawing plans to acquire Bisleri")
Shares of Tata Consumer Products (TCPL) dipped 2 per cent to Rs 693.05 on the BSE in Monday’s intra-day trade after the Tata Group company ceased negotiations with Bisleri for a potential acquisition. It said no definitive agreement or binding commitment has been signed on this matter.
TCPL had begun talks with the Chauhan family two years ago but decided to call off negotiations last week. Last November, Ramesh Chauhan, the chairman of Bisleri International, told Business Standard that he was in discussion with TCPL to sell a majority stake in the company for Rs 6,000-7,000 crore, adding that he expected the deal to be completed in 7-8 months.
On Friday, March 17, 2023, after market hours Tata Consumer announced that the company had clarified that it evaluates various strategic opportunities for growth and expansion of its business, on an ongoing basis, and pursuant to this, the Management of the Company remained in discussions with various parties, including Bisleri International Private Limited ('Bisleri').
In this regard, the company wishes to update that it has now ceased negotiations with Bisleri with regard to a potential transaction and to confirm that the company has not entered into any definitive agreement or binding commitment on this matter. The above announcement is issued voluntarily to prevent any speculation concerning the matter, the company said in an exchange filing.
In past three months, TCPL has underperformed the market by falling 14 per cent, as compared to nearly 7 per cent decline in the S&P BSE Sensex. In past one year, it slipped 10 per cent, as against 1 per cent fall in the benchmark index. The stock hit a 52-week low of Rs 685 on March 16, 2023.
TCPL is one of the major fast moving consumer goods (FMCG) companies present in tea, coffee & other beverages in India, UK, US, Canada & some other geographies. In India, it also has salt, pulses, spices & other foods products. Its subsidiary NourishCo is present in packaged water & other beverages. The company is in a JV with Starbucks, which has 311 stores in India.
According to analysts at KRChoksey Shares and Securities TCPL has seen a challenging macro environment, which has affected its volumes in India as well as internationally.
In October-December (Q3FY23) quarter, there has been an improvement in the trajectory of volumes for the India foods and the International tea business. TCPL has focused on maintaining or improving its market share across businesses. TCPL is seeing strong traction in its ‘Growth businesses’ and as they scale up, these will aid profitability, analysts said in Q3 result update.
The brokerage firm expects margin improvement due to the delayed impact of pricing in international business, premiumization efforts, and cost rationalization.
Analysts at ICICI Securities believe the company would be able to grow these newer food categories at a faster pace in the long run, which would offset the impact of slower growth categories (tea & salt) & stagnant international business. Further, we believe premiumisation strategy in tea, salt & other categories would help improve margin, going forward.
“We also believe aggressive expansion in Starbucks would result strong cash flow generation in the next three to four years with many existing stores gaining maturity. The current growth trends and low margins are only impacted by transitory macro factors (commodity inflation in international business & adverse currency movement). We remain positive on the company on growth prospects & margin expansion possibility,” the brokerage firm said.
TCPL had begun talks with the Chauhan family two years ago but decided to call off negotiations last week. Last November, Ramesh Chauhan, the chairman of Bisleri International, told Business Standard that he was in discussion with TCPL to sell a majority stake in the company for Rs 6,000-7,000 crore, adding that he expected the deal to be completed in 7-8 months.
On Friday, March 17, 2023, after market hours Tata Consumer announced that the company had clarified that it evaluates various strategic opportunities for growth and expansion of its business, on an ongoing basis, and pursuant to this, the Management of the Company remained in discussions with various parties, including Bisleri International Private Limited ('Bisleri').
In this regard, the company wishes to update that it has now ceased negotiations with Bisleri with regard to a potential transaction and to confirm that the company has not entered into any definitive agreement or binding commitment on this matter. The above announcement is issued voluntarily to prevent any speculation concerning the matter, the company said in an exchange filing.
In past three months, TCPL has underperformed the market by falling 14 per cent, as compared to nearly 7 per cent decline in the S&P BSE Sensex. In past one year, it slipped 10 per cent, as against 1 per cent fall in the benchmark index. The stock hit a 52-week low of Rs 685 on March 16, 2023.
TCPL is one of the major fast moving consumer goods (FMCG) companies present in tea, coffee & other beverages in India, UK, US, Canada & some other geographies. In India, it also has salt, pulses, spices & other foods products. Its subsidiary NourishCo is present in packaged water & other beverages. The company is in a JV with Starbucks, which has 311 stores in India.
According to analysts at KRChoksey Shares and Securities TCPL has seen a challenging macro environment, which has affected its volumes in India as well as internationally.
In October-December (Q3FY23) quarter, there has been an improvement in the trajectory of volumes for the India foods and the International tea business. TCPL has focused on maintaining or improving its market share across businesses. TCPL is seeing strong traction in its ‘Growth businesses’ and as they scale up, these will aid profitability, analysts said in Q3 result update.
The brokerage firm expects margin improvement due to the delayed impact of pricing in international business, premiumization efforts, and cost rationalization.
Analysts at ICICI Securities believe the company would be able to grow these newer food categories at a faster pace in the long run, which would offset the impact of slower growth categories (tea & salt) & stagnant international business. Further, we believe premiumisation strategy in tea, salt & other categories would help improve margin, going forward.
“We also believe aggressive expansion in Starbucks would result strong cash flow generation in the next three to four years with many existing stores gaining maturity. The current growth trends and low margins are only impacted by transitory macro factors (commodity inflation in international business & adverse currency movement). We remain positive on the company on growth prospects & margin expansion possibility,” the brokerage firm said.
Technical View
Bias: Negative
Target: Rs 660
Support: Rs 680
Resistance: Rs 709
The stock has witnessed a gradual decline since mid-December 2022 on the weekly chart, and is now fairly oversold.
Similarly, on the daily scale, the stock has been trending below its 20-DMA (Daily Moving Average) on a consistent basis during this period. The near-term bias continues to remain negative as long as the stock trades below Rs 709.
On the downside, one should keep a close eye on Rs 680, as sustained trade below the same could further weaken the stock towards Rs 660 level.
(With inputs from Rex Cano)
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