Interaction with the CEO
18 June 2020
Tata Consumer – Takeaways from conversation with CEO
The Tata group is clearly focused on leveraging its brand and participating in India’s INR30t
consumption story. To realize its vision, the group has not only consolidated Tata Chemical’s
consumer business with Tata Consumer Products (TCP), but has also brought in a new CEO and
MD – Mr. Sunil D'Souza – to steer the company in the right direction. Post taking over the reins
of TCP in Apr’20, we interacted with Mr. D'Souza to learn his long-term views and plans for the
company. Key insights from the discussion highlighted below:
Well placed to ride India’s INR30t consumption wave
Mr. Sunil D' Souza joined TCP in order to pursue a bigger role compared to his last
stint as CEO with Whirlpool India. He believes that TCP is well positioned to ride
India’s INR30t consumption wave as it has renewed its focus on the consumer
products’ space due to having (a) a portfolio of market leading and high growth
potential brands, (b) deep understanding of consumers, (c) wide distribution
network of over 2.5m retail outlets, and (d) the legacy of the Tata group.
In Mr. D’Souza’s view, TCP has the key ingredients to rank amongst the top FMCG
companies in India. TCP has (a) one of Tata’s biggest brands, (b) a passionate team,
(c) adequate resources at disposal, and (d) differentiated products. Thus, the focus is
to build TCP in this direction, which is also being supported by the company’s Board
of Directors. He further says that the company is aiming for double-digit revenue
growth along with margin expansion.
To evaluate inorganic acquisition from financial lens as well
The company currently has net cash of INR13b with expectation of free cash flow
generation of INR7-8b for FY21E. Thus, the cumulative cash balance is likely to reach
INR20b by end-FY21E. According to Mr. D’Souza, these funds would be deployed
toward organic/inorganic acquisitions in the adjacent category of the food and
beverages space (in the near term).
He further highlighted that the company is in the process of clearly defining
acquisition opportunities. Due to the COVID-19 crisis, many acquisition
opportunities are likely to come up; however, TCP plans to remain selective. An
acquisition would be considered only when the target company brings in a brand,
sourcing capability, technology or distribution to the table. Additionally, TCP would
also evaluate the financial angle of an acquisition – whether it is RoCE/RoE/margin
accretive – which in turn would create higher value for the company.
As an example, Mr. D’Souza cites TCP’s acquisition in FY20 of Dhunseri Tea for INR1b
(houses brands like
– a prominent player in Rajasthan.
With this acquisition, TCP could enter into the Rajasthan market with its own
product, which was not the case earlier, he says.
Currently, TCP’s internal IRR hurdle rate for any new project is >20%.
Mr Sunil D'Souza
CEO & MD
Mr. D’Souza took over the
reins of Tata Consumer
Products (TCP) as MD & CEO
from Apr’20. Previously, he
has served as the MD of
Whirlpool India Limited. Mr.
D’Souza has worked with
PepsiCo Inc. for 15 years – his
last assignment was as
General Manager of the
VIMAPS region, Malaysia. He
has also worked with Coca
Cola, Standard Chartered Bank
and Brooke Bond Lipton India
(now HUL) in various
capacities. He holds a
Bachelor's degree in
Engineering and a Post-
Graduate diploma in
Management from IIM,
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Near-term focus to set the platform right, which should unleash cost/revenue synergies
By setting the platform right, TCP has expanded its sales and distribution reach to 2.5m retail outlets (v/s 2m
pre-merger), which Mr. D’Souza believes would increase further as the distribution multiplier comes into play.
Retail outlet reach of the company is currently lower as compared to other FMCG companies, and thus,
provides enough room for an increase, he adds.
According to Mr. D’Souza, TCP is targeting to realize cost synergies of INR600-700m and the company is well on
track to achieve the same.
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com); +91 22 6129 1569
Research Analyst: Darshit Shah
(Darshit.Shah@MotilalOswal.com); +91 22 6129 1546;
(Yusuf.Inamdar@motilaloswal.com); +91 22 6129 1553
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.