Growth Portfolio Emerges As The Primary Engine

Tata Consumer Products, the FMCG arm consolidating the Tata Group's food and beverage interests, reported that its non-legacy "growth businesses" expanded 47% year-on-year to Rs 1,314 crore in the June quarter, lifting their share of the India business to 36%, up from 28% a year earlier and above management's own guided threshold of 30%. ICICI Direct's analysts — Kaustubh Pawaskar, Abhishek Shankar and Sonal Rajpal — noted that Tata Sampann, which contributes roughly 44% of growth-business revenue, expanded 58%, powered by 30% growth in its core pulses, grains and spices lineup and a doubling of newer additions such as dry fruits and cold-pressed oil.

Ready-to-drink beverages benefited from an extended summer, posting 41% revenue growth on 35% volume growth, while Capital Foods staged a 40% recovery and the organic foods business grew 27%. The brokerage expects these categories to sustain strong double-digit expansion, providing a structural cushion for consolidated margins in the quarters ahead.

Salt Holds Steady, Tea Feels The Heat

Tata Salt, which accounts for roughly a fifth of consolidated volumes, delivered 7% volume-led growth, aided by 13% growth in value-added salt variants. Calibrated price hikes are expected to offset input-cost inflation, with the brokerage projecting 5-7% growth for the category near term.

Branded tea and coffee volumes grew a modest 2%, hurt by the prolonged summer that curbed hot-beverage consumption, while value sales actually declined 4% as the company passed lower tea costs on to consumers. Domestic raw tea prices have risen 7-10%, and management has already pushed through calibrated price increases across key brands, with further action contingent on how the new crop season, still only weeks old, ultimately plays out.

Margins Set To Widen Through FY27

Consolidated gross margin expanded 257 basis points year-on-year to 42.7%, aided by favourable tea and coffee prices, while EBITDA margin improved 84 basis points to 13.5%. Growth businesses such as Capital Foods and organic foods are already operating at gross margins near 49%, well above the consolidated 43% level, and Tata Sampann is approaching mid-teen profitability. ICICI Direct has retained its forecast of 50-75 basis points of EBITDA margin expansion in FY27, driven by pricing actions, a richer product mix and operating leverage as growth categories scale.

What Management Told Analysts

Valuation And Forward Estimates

ICICI Direct has broadly held its FY27 and FY28 earnings estimates steady, projecting consolidated revenue of Rs 22,987.6 crore and Rs 25,799.7 crore respectively, with EBITDA margins climbing to 14.6% and 15.2%. The brokerage flagged sustained tea and coffee price inflation as the key swing factor for these projections. At the target price, the stock would trade at roughly 53 times FY27E earnings, moderating to about 44 times FY28E earnings — a premium the brokerage frames as justified by the accelerating shift toward higher-margin, faster-growing categories.