Tata Consumer Products (TCPL) witnessed a 3 percent decline in its share price, dropping to INR 853.85 on the BSE during Thursday’s intra-day trading session. This decline followed the company’s official denial of news reports suggesting discussions regarding the acquisition of a stake in the Indian food snack chain Haldiram’s. Interestingly, in the previous session, TCPL’s stock had surged by over 4 percent in response to the initial reports indicating its interest in Haldiram’s.
On September 6, Reuters disclosed that Tata Consumer Products was in discussions to purchase a minimum of 51 percent ownership in Haldiram’s. Nevertheless, it was revealed that Tata Consumer Products had reservations regarding the $10 billion valuation that was being sought during the negotiations.
On clarification on the news report, TCPL said that the company is not in negotiations as reported. “However, the company evaluates various strategic opportunities for growth and expansion of the business of the company, on an ongoing basis. The company will make appropriate announcements, as and when any such requirement arises,” Tata Consumer said.
In an exchange filing, the Tata Group company denied the report. “The company is not in negotiations as reported in the above-referred news article,” said Tata Consumer Products in the filing, referring to the report.
Haldiram’s also refuted these claims on CNBC-TV18.
During the past six months, TCPL’s stock has demonstrated strong performance, outpacing the market with a remarkable 19 percent increase, compared to the modest 9 percent rise observed in the S&P BSE Sensex. However, over the past year, it has exhibited relative underperformance, with a gain of only 4 percent as opposed to the robust 11 percent rally witnessed in the benchmark index.
TCPL operates in the consumer product industry, with its core activities encompassing trading, manufacturing, and distribution. Its product portfolio primarily includes items such as tea, coffee, water, salt, pulses, spices, snacks, and ready-to-eat packaged foods, all of which fall under the umbrella of the branded business segment. The Group’s branded business operations are primarily focused in regions including India, Europe, the United States, Canada, and Australia.
On the other hand, TCPL’s non-branded plantation business is primarily located in India, while its tea and coffee extraction ventures are predominantly situated in India, Vietnam, and the United States.
According to Tata Consumer Products’ FY23 annual report, the organized Indian food and beverage market is projected to experience a growth rate ranging from 10 to 15 percent over the next five years. However, the past 6 to 12 months have witnessed significant inflation in input costs, driven by rising commodity prices, which have had an impact on overall demand trends. This impact has been particularly notable in rural markets.
ICICI Securities analysts are of the opinion that the market share decline of 110 basis points (bps) in India Tea and 30 bps in India Salt should be viewed as a temporary setback, mainly due to the impact on North India, a crucial market. They anticipate a rebound in market share in FY24-25, driven by various strategic measures, including distribution enhancements, an extended regionalization strategy in Jharkhand and Odisha, and significant investments in innovation, all of which the brokerage firm has factored into its models.