8 May 2021
4QFY21 Results Update | Sector: Consumer
Tata Consumer Products
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
CMP: INR629
TP: INR725 (+15%)
Buy
TATACONS IN
922
Scale-up of Tata Sampann remains critical
579.7 / 7.9
698 / 326
Higher tea prices impacted standalone gross margins by 10.1pp YoY to
-5/7/27
30.9%, and higher A&P consequently impacted the consolidated EBITDA
2504
margin by 290bps YoY to 9.9%. Consolidated EBITDA de-grew 3% YoY on the
65.3
High tea prices dent EBITDA margin; performance
below expectation
Financials & valuations (INR b)
Y/E Mar
2021
2022E
Sales
116.0
122.5
EBITDA
15.4
18.5
PAT
8.7
11.2
EBITDA (%)
13.3
15.1
EPS (INR)
9.5
12.2
EPS Gr. (%)
20.8
28.5
BV/Sh. (INR)
158
165
Ratios
Net D/E
(0.2)
(0.2)
RoE (%)
6.1
7.5
RoCE (%)
8.3
10.2
Payout (%)
43.6
37.0
Valuations
P/E (x)
66.5
51.8
EV/EBITDA (x)
35.8
29.9
Div Yield (%)
1.9
2.1
FCF Yield (%)
7.5
5.7
2023E
138.4
22.5
14.0
16.3
15.2
25.4
176
(0.3)
8.9
12.1
30.5
41.3
24.5
2.4
6.6
back of 13% EBITDA de-growth in standalone. The Tata Sampann portfolio
grew 2% during the quarter, impacted by volatility in the Pulses market;
portfolio grew 26% during FY21. The scale-up of the Sampann portfolio
remains a key monitorable.
We lower our earnings estimates for FY22 by 7% on the back of near-term
margin pressure in Tea. We maintain our earnings estimates for FY23 and
arrive at an FY23 SOTP-based TP of INR725/share. Maintain
Buy.
Tata Consumer Products (TCP) reported consolidated revenue growth of
26% YoY to INR30.4b (est. INR28.6b). The EBITDA margin contracted 290bp
YoY to 9.9% (est. 11.9%) on a 620bp gross margin contraction to 39.2%.
EBITDA de-grew 3% YoY to INR3,002m (est. INR3,397m). Adj. PAT was down
36% YoY to INR1.1b (est. INR1.9b), largely due to higher tax rate and MI.
India Branded Beverages/Foods revenue was up 60%/22% YoY to
INR12b/INR6.4b. India Beverages EBIT de-grew 40% YoY to INR524m, while
India Foods EBIT grew 52% YoY to INR868m. International Branded
Beverages revenue remained flat YoY to INR8.8b, with EBIT de-growth of
14% YoY to INR1,101m.
India Branded Beverages/Foods volumes grew 23%/21% YoY, benefitting
from a low base effect and expansion in the distribution reach. Salt revenue
grew 26% during the quarter. The Tata Sampann portfolio was up 2% in 4Q,
impacted by volatility in the Pulses market.
Standalone revenue grew 39% YoY to INR18.5b and EBITDA was down 11%
YoY to INR1.4b. The gross margin contracted 1,010bp YoY (+80bp QoQ) to
30.9% on the back of higher tea prices.
Tata Coffee consol:
Revenue grew 14% YoY to INR5.9b, with EBITDA growth
of 22% YoY to INR944m.
Tata Coffee standl:
Revenue grew 30% to
INR2,177m and EBITDA was INR241m v/s INR7m last year.
Tata Coffee
Overseas
(Tata Coffee consol less Tata Coffee standl): Revenue grew 7% YoY
to INR3,736m, with EBITDA de-growth of 8% YoY to INR703m.
TCP Overseas Tea:
Revenue grew 8% to INR6b, with EBITDA declining 10%
YoY to INR637m.
In FY21, consolidated revenue/EBITDA/adj. PAT grew 20%/19%/21%. In
FY21, TCP generated CFO of INR16.6b, up 53% YoY, on the back of lower
trade receivables and higher payables; this was offset by higher inventory.
Higher distribution reach drives volume growth in India biz.
Shareholding pattern (%)
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
34.7
34.7
34.7
12.6
13.6
21.8
25.3
25.8
17.1
27.5
26.0
26.4
Note: FII includes depository receipts
Sumant Kumar - Research Analyst
(Sumant.Kumar@MotilalOswal.com)
Research Analyst: Darshit Shah
(Darshit.Shah@motilaloswal.com) /
Yusuf Inamdar
(yusuf.inamdar@motilaloswal.com)
hvs
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Tata Consumer Products
Highlights from management commentary
TCP has increased its reach to 2.4m outlets – a 15%/11% increase for Tea/Salt.
This is in line with TCP’s long-term strategy to double direct reach within 12M
and double numeric reach within 36M. Numeric reach / direct coverage was up
30%/20% YoY in FY21; TCP is on track to achieve its 1m target by Sep’21.
At the time of acquisition of the Salt business from Tata Chemicals, TCP targeted
synergies of INR1–1.5b at the EBIT level over 18M. Of this, INR50–70m of
monthly cost synergies has started to be realized.
Tata Starbucks:
Revenue growth of 14% was seen in 4Q, albeit on a low base
(impacted by COVID in Mar’20). FY21 revenue declined 33%, driven by the
adverse impact of COVID on out-of-home consumption. The business was
EBITDA+ for the year – it added 39 new stores and gained a presence in seven
new cities during the year.
Valuation and view
The unlocking of sales and distribution synergies is among the key reasons the
merger of the group companies has started to yield results – this is evident from
the market share increase in Tea (+190bp YoY) and Salt (+160bp YoY) in FY21 on
the back of an increase in numeric distribution (+15% in Tea and +11% in Salt).
Direct coverage increased 30% in FY21, and the management aims to reach 1m
by Sep’21. Thus, in our view, the company is taking a step in the right direction
to establish a strong S&D channel, which would act as key growth driver.
TCP has two strong legs in the India business – Tata Tea and Tata Salt – wherein
it is targeting lower double-digit growth, driven by a) cross-selling between the
Foods biz and TCP’s Tea distribution channel and b) expansion into new
geographies.
TCP is building its third leg, Tata Sampann, which deals in pulses and spices –
which should grow in the high double digits. The market size of Pulses/Spices in
India currently stands at INR1,500b/INR600b, with unorganized players forming
99%/70% of the market. Thus, growth is expected through capturing market
share from unorganized players via increasing distribution reach and new
product launches.
Over FY21–23E, sales/EBITDA/PAT is expected to post a CAGR of 9%/21%/27%.
We lower our earnings estimates for FY22 by 7% on the back of near-term
margin pressure in Tea. We maintain our earnings estimates for FY23 and arrive
at an FY23 SOTP-based TP of INR725/share. Maintain
Buy.
8 May 2021
2
 Motilal Oswal Financial Services
Tata Consumer Products
Consolidated - Quarterly Earnings Model
(INR m)
Y/E March
FY20
FY21
FY20
FY21
FY21
Var
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
4QE
(%)
Gross Sales
23,924 23,471 24,930 24,050 27,139 27,813 30,696 30,372 96,374 1,16,020 28,559
6
YoY Change (%)
32.7
33.3
30.3
35.5
13.4
18.5
23.1
26.3
32.9
20.4
18.7
Total Expenditure
20,415 20,323 21,748 20,967 22,313 23,818 27,082 27,370 83,453 1,00,583 25,162
EBITDA
3,509 3,148 3,181 3,084 4,827 3,996 3,613 3,002 12,922 15,438 3,397
-12
Margins (%)
14.7
13.4
12.8
12.8
17.8
14.4
11.8
9.9
13.4
13.3
11.9
Depreciation
576
587
614
640
619
626
644
659 2,417
2,547
650
Interest
186
204
201
187
173
179
181
155
779
687
178
Other Income
331
280
285
219
327
262
195
430 1,116
1,214
220
PBT before EO expense
3,078 2,637 2,651 2,476 4,362 3,454 2,983 2,618 10,842 13,417 2,789
Extra-Ord expense
-81
-15
-8 -2,644
633
-239
-61
-639 -2,748
-307
0
PBT
2,997 2,622 2,643
-168 4,995 3,215 2,922 1,979 8,094 13,111 2,789
-29
Tax
1,022
636
750
334 1,104
871
552
646 2,742
3,173
781
Rate (%)
33.2
24.1
28.3
13.5
25.3
25.2
18.5
24.7
25.3
23.6
28.0
Minority Interest
164
147
153
-460
180
161
192
205
4
738 -180.0
Profit/Loss of Asso. Cos.
-74
92
-46
-723
-435
389
4
-590
-751
-633
-250
Reported PAT
1,737 1,932 1,694
-765 3,276 2,571 2,182
539 4,598
8,567 1,938
Adj PAT
1,798 1,943 1,700 1,776 2,643 2,712 2,228 1,133 7,216
8,716 1,938
-42
YoY Change (%)
33.7
10.1
71.1 466.0
47.0
39.6
31.1
-36.2
63.4
20.8
3.1
Margins (%)
7.5
8.3
6.8
7.4
9.7
9.8
7.3
3.7
7.5
7.5
6.8
Nos. include Tata Chemicals’ Consumer biz nos.
Key Performance Indicators
Y/E March
Consolidated
Revenue Growth (%)
Standalone
Overseas Tea Biz
Tata Coffee Ltd (TCL) Consol
TCL Standalone
Coffee Overseas
EBITDA Margin (%)
Standalone
Overseas Tea Biz
TCL Consol
TCL Standalone
Coffee Overseas
Cost Break-up
RM Cost (% of sales)
Staff Cost (% of sales)
Adv. and Sales (% of sales)
Other Cost (% of sales)
Gross Margins (%)
EBITDA Margins (%)
EBIT Margins (%)
1Q
61.1
-2.2
10.5
25.9
1.3
15.9
8.5
16.9
11.4
21.0
57.1
8.9
5.5
13.9
42.9
14.7
12.3
FY20
2Q
68.5
-4.2
5.5
4.7
6.1
14.3
7.2
16.5
9.4
20.9
56.5
9.4
6.9
13.8
43.5
13.4
10.9
3Q
64.5
-5.3
7.7
0.6
11.7
14.1
4.9
17.0
8.9
21.0
56.5
8.8
8.1
13.9
43.5
12.8
10.3
4Q
70.3
4.2
12.2
-16.9
34.8
12.0
12.8
14.9
0.4
21.9
54.5
9.6
7.5
15.5
45.5
12.8
10.2
1Q
9.7
12.8
25.9
-12.3
54.6
20.3
8.9
18.8
8.7
23.2
55.3
8.4
4.9
13.6
44.7
17.8
15.5
FY21
2Q
21.6
14.5
12.9
0.0
21.1
14.6
11.4
16.3
6.2
21.6
59.2
8.3
6.0
12.2
40.8
14.4
12.1
FY20
3Q
34.1
8.7
6.3
-5.0
11.8
10.0
11.8
18.1
12.1
20.6
62.2
7.9
6.8
11.3
37.8
11.8
9.7
4Q
38.5
7.8
14.4
30.1
6.9
7.7
10.7
16.0
11.1
18.8
60.8
8.9
7.1
13.3
39.2
9.9
7.7
65.9
10.7
9.0
2.4
13.2
14.1
8.5
16.3
7.8
21.2
56.1
9.2
7.0
14.2
43.9
13.4
10.9
25.7
10.7
14.7
2.4
21.8
12.8
10.7
17.3
9.5
21.1
60.8
8.4
6.3
12.6
40.5
13.3
11.1
FY21
8 May 2021
3
 Motilal Oswal Financial Services
Tata Consumer Products
Key exhibits
Exhibit 1: Consolidated revenue trend
Revenue (INRb)
33
33
30
35
19
23
26
10.3
9.8
14.7 13.4
12.8 12.8
Exhibit 2: Consolidated EBITDA trend
Growth (%)
EBITDA (INRb)
Margin (%)
17.8
14.4
11.8
9.9
11
13
5
2.0
1.7
3.5
3.1
3.2
3.1
4.8
4.0
3.6
3.0
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 3: Consolidated adj. PAT trend
PAT (INRb)
466
Exhibit 4: Standalone revenue trend
Revenue (INRb)
61
68
64
70
34
39
Growth (%)
Growth (%)
(22)
(49)
34
10
71
47
40
31
22
(36)
5
10
10
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 5: Standalone EBITDA trend
EBITDA (INRb)
15.9
12.8
7.5
Margin (%)
20.3
14.3 14.1
12.0
14.6
10.0
7.7
Exhibit 6: Standalone adj. PAT trend
PAT (INRb)
Growth (%)
111
60
(16)
(9)
10
30
52
17
(2)
(18)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 7: TCP’s overseas Tea revenue trend
Revenue (INRm)
10
4
Exhibit 8: TCP’s overseas Tea EBITDA trend
EBITDA (INRm)
14
9
8
4.9
9.8
8.5
7.2
4.9
Margin (%)
12.8
8.9
11.4 11.8 10.7
Growth (%)
13
(0)
(2)
(4)
(5)
Source: Company, MOFSL
Source: Company, MOFSL
8 May 2021
4
 Motilal Oswal Financial Services
Tata Consumer Products
Exhibit 9: Tata Coffee’s consol. revenue trend
Revenue (INRm)
23
12
Growth (%)
26
14
6
Exhibit 10: Tata Coffee’s consol. EBITDA trend
EBITDA (INRm)
16.9 16.5 17.0
Margin (%)
18.8
14.9
16.3
18.1
16.0
11
13
11.9
13.7
5
6
8
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 11: Tata Coffee’s standalone revenue trend
Revenue (INRm)
Growth (%)
Exhibit 12: Tata Coffee’s standalone EBITDA trend
EBITDA (INRm)
11.4
9.4
30
8.9
7
0.4
97
135
229
175
148
152
8.7
6.2
Margin (%)
12.1
11.1
8
(1)
26
5
5.9
6.7
1
(17)
(12)
(0)
(5)
115
190
241
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 13: Tata Coffee’s overseas revenue trend
Revenue (INRm)
42
35
21
6
2
1
12
12
7
Growth (%)
55
Exhibit 14: Tata Coffee’s overseas EBITDA trend
EBITDA (INRm)
19.1
Margin (%)
18.8
23.2
21.6 20.6
21.0 20.9 21.0 21.9
15.1
Source: Company, MOFSL
Source: Company, MOFSL
8 May 2021
5
 Motilal Oswal Financial Services
Tata Consumer Products
Exhibit 15: Revenue at a glance (4QFY21)
Source: Company, MOFSL
Exhibit 16: Revenue at a glance (full-year FY21)
Source: Company, MOFSL
8 May 2021
6
 Motilal Oswal Financial Services
Tata Consumer Products
Exhibit 17: Consolidated segmental results
INR m
Segmental revenue
Branded Business
India - Beverages
India - Foods
International - Beverages
Total Branded Business
Non-Branded Business
Total Segment Revenue
Others
Inter segment sales
Revenue from Operations
Segment Results
Branded Business
India - Beverages
India - Foods
International - Beverages
Total Branded Business
Non-Branded Business
Total Segment Results
EBIT margins
India - Beverages
India - Foods
International - Beverages
Total Branded Business
Non-Branded Business
11.5%
10.9%
14.7%
12.7%
0.5%
6.2%
14.8%
13.2%
10.4%
8.3%
4.3%
13.5%
12.6%
9.2%
11.9%
(720)
261
(212)
(352)
1,141
(187)
(128)
(66)
(127)
363
872
573
1,285
2,729
12
2,741
793
934
1,226
2,953
204
3,156
524
868
1,101
2,492
385
2,877
-39.9%
51.5%
-14.3%
-8.7%
3132.8%
5.0%
-34.0%
-7.0%
-10.2%
-15.6%
88.9%
-8.8%
7,548
5,244
8,744
21,537
2,513
24,050
64
-64
24,050
12,754
6,306
9,262
28,322
2,465
30,787
84
-175
30,696
12,048
6,417
8,752
27,217
3,236
30,454
8
-89
30,372
26.3%
-1.1%
59.6%
22.4%
0.1%
26.4%
28.8%
26.6%
-5.5%
1.8%
-5.5%
-3.9%
31.3%
-1.1%
4QFY20
3QFY21
4QFY21
%/bp ch YoY
%/bp ch QoQ
Source: Company, MOFSL
Exhibit 18: Status of business integration
Source: Company, MOFSL
8 May 2021
7
 Motilal Oswal Financial Services
Tata Consumer Products
Exhibit 19: Expansion in terms of reach in FY21
Source: Company, MOFSL
Exhibit 20: Higher volume growth in India businesses
Source: Company, MOFSL
Management call highlights
India Beverages
In 4QFY21, the India Packaged Beverages business recorded 53% YoY value
growth and 23% YoY volume growth, driven by robust growth across most of the
brands – which also resulted in market share gains. Volume growth of 12% YoY
was reported in FY21 and revenue growth stood at 32% YoY.
NourishCo sustained strong growth momentum in 4Q with 86% YoY revenue
growth, albeit on a low base (due to the COVID impact in Mar’20). Revenue was
up 4% YoY to INR1,880m, impacted by COVID-led lockdowns and lower out-of-
home consumption. Geographic expansions and capacity additions to the
business are on track. Tata Water Plus and Tata Gluco Plus delivered exceptional
growth. Tata Fruski – an innovative drink inspired by local street culture – was
8 May 2021
8
 Motilal Oswal Financial Services
Tata Consumer Products
launched in Hyderabad and Vizag with strong initial response. The company
plans to launch the product pan-India.
In line with the strategic priority of exploring new opportunities, the health &
wellness focused Foods portfolio was further enhanced through the acquisition
of Kottaram Agro Foods Pvt Limited (brand Soulfull), renamed Tata Consumer
Soulfull. This opens up significant opportunities in the fast-growing ‘On-the-
Table’ and ‘On-the-Go’ segments.
Coffee volumes were up 19% YoY, with revenue growth of 36% in FY21.
4Q margins were impacted by inflation in Tea and increased investment in A&P.
The business’ working capital stood at 48 days as of Mar’21, down from 78 days
in Mar’20, despite extraordinarily high inventory (due to Raw Tea inflation).
The company has taken price increases over the last two quarters. By the end of
FY22, EBIT margins would return to pre-COVID levels in the India Beverages
business.
Tea prices:
Currently, tea prices stand at ~INR158/kg, still 50% higher v/s the
same period last year. The company carries 60–90 days’ worth of tea inventory.
TCP plans to raise tea prices if RM cost continues to hover around current levels.
India Foods
The India Foods business posted 22% YoY revenue growth and 21% YoY volume
growth in 4Q.
Revenue for India Foods was up 18% YoY in FY21 on the back of volume growth
of 11% YoY.
Salt revenue grew 26% during the quarter, leading to 17% growth for FY21.
The Tata Sampann portfolio grew 2%, impacted by volatility in the Pulses
market. The portfolio grew 26% for FY21.
It has continued to drive premiumization with 75% growth in the Value Added &
Niche Salt portfolio during the year.
It has fueled further efficiency in WC, which came in negative as of Mar’21.
The Tata Sampann portfolio saw five new product launches in the Ready-to-
Cook category during the quarter –
Haldi Doodh Mix, Masala Daliya Khichdi Mix,
Dhokla Mix, Supergrain Ragi Idli Mix, and Supergrain Ragi Dosa Mix.
Due to increased volatility in the prices of pulses, Tata Sampann’s revenue
growth was impacted. The company is confident of growth in the Tata Sampann
portfolio going forward.
Business integration
The integration of India Foods and India Beverages is now complete. A
redesigned sales and distribution system is in place, with digitization across
channel partners; a new integrated business planning system covering demand
and supply planning is now live, and ERP integration and migration to
SAP4HANA in India are complete. As a part of its transformation journey, the
company continues to focus on building blocks for the future – S&D
infrastructure, digital, A&P, and innovation.
The consolidation of distribution channel partners is complete; it is on track to
double direct reach by Sep’21.
Channel partner digitization has been completed for urban distributors and has
been initiated for rural distributors.
9
8 May 2021
 Motilal Oswal Financial Services
Tata Consumer Products
Pan-India CFA consolidation is complete.
Integrated business planning, including demand/supply planning, is live.
Synergy identification is complete; realization had been commenced from
3QFY21.
It added 2000 rural distributors in FY21.
At the time of acquisition of the Salt business from Tata Chemicals, TCP targeted
synergies of INR1–1.5b at the EBIT level over 18M; of this, INR50–70m of
monthly cost synergies have started to get realized.
Tata Coffee
Revenue grew 30% in 4Q, led by the Plantations and Extractions businesses.
Revenue for the year grew 14%, with EBIT growth of 69%. EBIT growth in FY21
was driven by higher realization in Plantations and cost optimization across the
business.
Extractions:
The overall business grew 12% in FY21, led by Vietnam, which more
than offset the decline in the domestic business.
Plantations:
Robust value growth in Tea was driven by higher realization;
revenue for coffee plantations grew on the back of higher crop volumes in FY21.
Tata Starbucks
Revenue growth of 14% was seen in 4Q, albeit on a low base (impacted by
COVID in Mar’20).
FY21 revenue declined 33%, driven by the adverse impact of COVID on out-of-
home consumption. The business was EBITDA+ for the year.
TCP added 39 new stores and gained a presence in seven new cities during the
year. As of Mar’21, 94% of stores had been re-opened.
While the business saw sequential recovery up to February, localized lockdowns
and curfews have now begun to impact store operating hours in several cities.
New store formats were introduced during the year, such as drive-thrus and
small-engine stores; it gained a presence in the cities of Kochi, Lucknow,
Amritsar, Ludhiana, Bhopal, Indore, and Kanpur.
It achieved significant savings during the year through rental renegotiations and
overhead optimization.
UK business
Revenue for the quarter declined 10% on pantry up-stocking in the base quarter.
Revenue was up 2% (constant-currency) for the year, with substantial growth in
EBIT, partly aided by the increased in-home consumption of tea due to the
pandemic.
EBIT growth was driven by strong overhead management and lower trade
promotions, coupled with stable commodity costs.
While the out-of-home consumption and wholesale channels came under
pressure due to COVID, the impact was mitigated by driving distribution gains in
the discounter channel and increased activation in the online channel.
Pure-play online revenue more than doubled in FY21, with Tetley outpacing
online growth in the Tea category.
8 May 2021
10
 Motilal Oswal Financial Services
Tata Consumer Products
US business
Coffee: 4Q revenue was up 3% (constant-currency) on pantry loading in the base
quarter.
Coffee had a strong year, with revenue growth of 9% (constant-currency) and
volume growth of 7%, with K-cup growth outpacing that of coffee bags.
The innovation momentum continued, with good performances from 32-count
K-cups and Barista Blends.
Tea (excluding Empirical): Robust revenue growth of 16% was seen in FY21 –
driven by innovation, new customer acquisitions, and e-commerce – to
capitalize on the increased in-home consumption of tea due to the pandemic.
Good Earth and Teapigs grew faster than Tetley, which also grew robustly.
Triple-digit portfolio growth was seen in e-commerce in FY21, led by EOC Coffee
and the Good Earth and Tetley innovations.
Canada business
Revenue for the quarter grew 6% (constant-currency) despite a high base, which
saw pantry loading last year.
Robust revenue growth of 15% (constant-currency) was seen in FY21, driven by
the increased in-home consumption of tea.
Tetley continues to be the #1 brand in the market, with both regular and
specialty teas outgrowing the category during the year.
Specialty tea sales were further boosted by the new Tetley Super 3.0 range
introduced during the year. The brand leads volumes in the Specialty Tea
category in Canada.
Strong YoY growth in profitability was led by higher sales, lower promotions,
and strong control in overheads.
Others
E-Commerce contribution (% of sales) increased to 5.2% in FY21 (v/s 2.5% last
year).
In FY21, market share in Tea/Salt expanded 190bp/160bp YoY.
Expanding reach:
TCP has increased its reach to 2.4m outlets – a 15%/11%
increase for Tea/Salt. This is in line with TCP’s long-term strategy to double
direct reach within 12M and double numeric reach within 36M. Numeric reach /
direct coverage was up 30%/20% YoY in FY21; TCP is on track to achieve its 1m
target by Sep’21.
Market share gains in Tea biz:
TCP gained market share from small local and
organized players at multiple regional locations in FY21. It gained 190bp/160bp
in Tea/Salt from small regional players.
TCP had net cash of INR24.2b as of FY21.
Higher profit via JV was attributable to the Tea Plantation business (benefit from
higher tea prices), offset by higher loss in Starbucks.
Net WC days reduced to 42 days in FY21 from 59 days in FY20.
The company targets double-digit topline growth and has a strong focus on
margins, aided by synergies.
8 May 2021
11
 Motilal Oswal Financial Services
Tata Consumer Products
Valuation and view
4Q performance was impacted by higher tea prices, leading to consolidated
gross margin contraction of 620bp and higher A&P spends (+19% YoY).
However, the management expects tea prices to stabilize with new crop; this
would ease the pressure on gross margins going forward.
The unlocking of sales and distribution synergies is among the key reasons the
merger of the group companies has started to yield results – this is evident from
the market share increase in Tea (+190bp YoY) and Salt (+160bp YoY) in FY21 on
the back of an increase in numeric distribution (+15% in Tea and +11% in Salt).
Direct coverage increased 30% in FY21, and the management aims to reach 1m
by Sep’21. Thus, in our view, the company is taking a step in the right direction
to establish a strong S&D channel, which would act as key growth driver.
TCP has two strong legs in the India business – Tata Tea and Tata Salt – wherein
it is targeting lower double-digit growth, driven by a) cross-selling between the
Foods biz and TCP’s Tea distribution channel and b) expansion into new
geographies.
TCP is building its third leg, Tata Sampann, which deals in pulses and spices –
which should grow in the high double digits. The market size of Pulses/Spices in
India currently stands at INR1,500b/INR600b, with unorganized players forming
99%/70% of the market. Thus, growth is expected through capturing market
share from unorganized players via increasing distribution reach and new
product launches.
Over FY21–23E, sales/EBITDA/PAT is expected to post a CAGR of 9%/21%/27%.
We lower our earnings estimates for FY22 by 7% on the back of near-term
margin pressure in Tea. We maintain our earnings estimates for FY23 and arrive
at an FY23 SOTP-based TP of INR725/share. Maintain
Buy.
Exhibit 21: Valuation methodology
EV/EBITDA
India Tea (TCP Standalone)
Coffee India (ex-Starbucks) @57%
Coffee Overseas
Consumer (Salt & others)
Overseas tea (Tetley UK)
DCF
Starbucks JV
Enterprise value
Less: Net debt
Market value (INR m)
No. of shares (m)
Target price (INR)
FY23 EBITDA
7,684
506
2,887
7,706
2,599
Multiple (x)
34
10
12
34
10
EV
2,63,255
5,288
34,645
2,63,554
27,163
30,312
6,24,216
-43,944
6,68,160
922
725
Source: MOFSL
8 May 2021
12
 Motilal Oswal Financial Services
Tata Consumer Products
Exhibit 22: One-year forward EV/EBITDA (x)
EV/EBITDA (x)
35.0
30.0
25.0
20.0
15.0
10.0
Avg (x)
Max (x)
Min (x)
+1SD
-1SD
29.8
29.8
18.9
13.8
8.8
5.0
0.0
7.9
Source: MOFSL
Exhibit 23: One-year forward P/E (x)
P/E (x)
80.0
Avg (x)
Max (x)
Min (x)
+1SD
-1SD
63.2
60.0
43.7
40.0
20.0
0.0
50.8
26.2
34.9
20.4
Source: MOFSL
Exhibit 24: Change in estimates
Earnings Change
(INR m)
Revenue
EBITDA
Adj. PAT
FY22E
1,21,847
19,528
12,023
Old
FY23E
1,34,609
22,147
13,989
FY22E
1,22,541
18,500
11,198
New
FY23E
1,38,368
22,538
14,044
FY22E
1%
-5%
-7%
Change
FY23E
3%
2%
0%
Source: MOFSL
8 May 2021
13
 Motilal Oswal Financial Services
Tata Consumer Products
Financials and valuations
Consolidated Income Statement
Y/E March
Net Sales
Change (%)
Gross Profit
Margin (%)
Other operating exp.
EBITDA
Margin (%)
Depreciation
Net Interest
Other income
PBT before EO
EO income/(exp.)
PBT after EO
Tax
Rate (%)
Minority and Associates
Reported PAT
Adjusted PAT
Change (%)
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Goodwill & Intangibles
Investments
Curr. Assets
Inventories
Account Receivables
Cash and Bank Balance
Others
Curr. Liability & Prov.
Account Payables
Other liabilities
Provisions
Net Curr. Assets
Def. tax liability
Appl. of Funds
2016
66,365
-17.0
30,149
45.4
23,606
6,543
9.9
1,168
1,169
820
5,026
-3,329
1,698
2,000
117.8
-247
-55
3,274
-13.3
2017
67,796
2.2
32,180
47.5
24,269
7,911
11.7
1,260
915
831
6,566
53
6,619
1,983
30.0
742
3,894
3,841
17.3
2018
68,154
0.5
31,160
45.7
22,771
8,389
12.3
1,160
428
942
7,743
-211
7,531
1,859
24.7
717
4,956
5,167
34.5
2019
72,515
6.4
32,439
44.7
24,579
7,859
10.8
1,226
525
1,571
7,680
-333
7,347
2,609
35.5
656
4,082
4,415
-14.6
2020
96,374
32.9
42,267
43.9
29,346
12,921
13.4
2,417
779
1,116
10,842
-2,748
8,094
2,742
33.9
754
4,598
7,216
63.5
2021
1,16,020
20.4
46,997
40.5
31,560
15,438
13.3
2,547
687
1,214
13,417
-307
13,111
3,173
24.2
1,371
8,567
8,716
20.8
2022E
1,22,541
5.6
52,560
42.9
34,061
18,500
15.1
2,628
407
1,396
16,861
0
16,861
4,552
27.0
1,110
11,198
11,198
28.5
(INR m)
2023E
1,38,368
12.9
59,384
42.9
36,846
22,538
16.3
2,708
380
1,535
20,987
0
20,987
5,876
28.0
1,066
15,110
14,044
25.4
(INR m)
2023E
922
1,60,911
1,61,832
12,552
5,423
1,79,807
65,773
26,706
39,066
1,129
75,966
4,277
1,00,771
26,536
9,098
49,366
15,770
35,932
18,955
14,036
2,942
64,839
5,470
1,79,807
2016
631
61,841
62,472
8,618
13,541
84,630
24,033
14,511
9,523
394
37,096
11,926
40,009
16,290
5,924
6,744
11,051
13,532
6,773
2,776
3,983
26,477
786
84,630
2017
631
62,024
62,655
9,195
7,866
79,716
23,711
13,650
10,060
632
34,979
13,534
36,309
14,530
5,925
7,412
8,444
14,345
7,378
3,389
3,578
21,965
1,454
79,716
2018
631
69,685
70,316
10,090
10,676
91,082
25,424
15,181
10,244
1,352
37,235
6,431
49,343
14,483
6,483
18,067
10,310
13,525
7,057
3,562
2,906
35,818
-3
91,082
2019
631
72,686
73,317
10,277
11,283
94,877
27,689
16,407
11,282
4,244
37,851
6,045
49,385
16,099
6,806
16,168
10,313
12,887
6,649
4,221
2,017
36,498
1,043
94,877
2020
922
1,37,227
1,38,149
10,925
11,825
1,60,898
59,111
18,824
40,288
954
73,338
4,893
65,258
17,120
9,224
24,550
14,364
20,799
9,440
8,603
2,756
44,459
3,033
1,60,898
2021
922
1,44,424
1,45,345
10,925
7,206
1,63,476
61,773
21,371
40,402
1,129
75,966
4,827
79,855
22,492
7,613
33,980
15,770
33,232
16,255
14,036
2,942
46,623
5,470
1,63,476
2022E
922
1,51,474
1,52,396
11,700
5,423
1,69,518
63,773
23,999
39,774
1,129
75,966
4,491
87,392
23,501
8,057
40,064
15,770
33,764
16,786
14,036
2,942
53,629
5,470
1,69,518
8 May 2021
14
 Motilal Oswal Financial Services
Tata Consumer Products
Financials and valuations
Cash flow statement
Y/E March
EBITDA
Prov. & FX
WC
Others
Direct taxes (net)
CF from Op. Activity
Capex
FCFF
Interest/dividend
Investments in subs/assoc.
Others
CF from Inv. Activity
Borrowings
Finance cost
Dividend
Others
CF from Fin. Activity
(Inc)/Dec in Cash
Opening balance
Closing balance (as per B/S)
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Dividend yield (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Debtor (Days)
Creditor (Days)
Inventory (Days)
Leverage Ratio (x)
Debt/Equity
2016
6,543
-132
-2,719
-190
-2,342
1,160
-1,545
-385
697
-509
4,273
2,917
-796
-663
-1,871
512
-2,818
1,259
5,485
6,744
2017
7,911
22
1,485
100
-2,106
7,412
-1,382
6,030
574
-280
2,503
1,415
-4,848
-615
-1,890
-805
-8,158
668
6,744
7,412
2018
8,389
-14
-1,389
-438
-2,992
3,556
-3,588
-32
485
-132
10,209
6,973
2,160
-282
-2,118
365
126
10,655
7,412
18,067
2019
7,859
22
-2,347
-827
-2,609
2,099
-2,823
-724
539
-358
3,374
733
358
-437
-2,158
-2,493
-4,731
-1,899
18,067
16,168
2020
12,921
-72
-649
1,364
-2,742
10,822
-1,596
9,227
564
-226
-5,470
-6,728
321
-703
-2,216
6,886
4,288
8,382
16,168
24,550
2021
15,438
41
3,054
1,203
-3,173
16,564
-2,107
14,457
731
-2,241
-467
-4,084
-573
-654
-2,673
851
-3,049
9,430
24,550
33,980
2022E
18,500
0
-922
0
-4,552
13,025
-2,000
11,025
1,396
0
0
-604
-2,000
-407
-4,147
217
-6,337
6,084
33,980
40,064
2023E
22,538
0
-1,908
0
-5,876
14,754
-2,000
12,754
1,535
0
0
-465
0
-380
-4,608
0
-4,988
9,302
40,064
49,366
2016
3.6
4.8
67.8
2.3
NA
1.9
2017
4.2
5.5
68.0
2.3
36.5
1.5
2018
5.6
6.9
76.3
2.4
29.9
0.9
2019
4.8
6.1
79.6
2.5
38.7
1.2
131.3
102.8
7.9
7.6
70.4
1.2
-1.1
2020
7.8
10.5
149.9
2.7
54.1
0.9
80.3
60.2
4.2
5.7
42.8
0.9
10.0
6.8
8.5
11.5
2.4
0.6
35
36
65
-0.1
2021
9.5
12.2
157.7
4.1
43.6
1.9
66.5
51.5
4.0
4.8
35.8
1.9
15.7
6.1
8.3
11.1
2.9
0.7
24
51
71
-0.2
2022E
12.2
15.0
165.4
4.5
37.0
2.1
51.8
41.9
3.8
4.5
29.9
2.1
12.0
7.5
10.2
12.7
3.1
0.7
24
50
70
-0.2
2023E
15.2
18.2
175.6
5.0
30.5
2.4
41.3
34.6
3.6
4.0
24.5
2.4
13.8
8.9
12.1
16.1
3.5
0.8
24
50
70
-0.3
5.6
7.6
8.2
7.0
0.8
33
37
90
0.1
6.1
9.0
10.6
6.7
0.9
32
40
78
0.0
7.8
9.4
11.7
6.7
0.7
35
38
78
-0.1
6.1
8.6
9.8
6.4
0.8
34
33
81
-0.1
8 May 2021
15
 Motilal Oswal Financial Services
Tata Consumer Products
NOTES
8 May 2021
16
 Motilal Oswal Financial Services
Tata Consumer Products
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
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Research Analyst views on Subject Company may vary based on Fundamental
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Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
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Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
8 May 2021
17
 Motilal Oswal Financial Services
Tata Consumer Products
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The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
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