Tata Consumer RI review - (Apply)

•    TCPL is a FMCG conglomerate from Tata group that has maintained its legacy. 
•    It marked growth in its top lines for FY23 and FY24.
•    It marked minor setback in bottom lines for FY24 following higher provisioning for depreciation, amortization and exceptional items. 
•    This offer appears attractively priced considering its last traded price. 
•    Investors may park funds for the medium to long term. 

PREFACE:
An RI from Tata group is considered as a mini-bonus for the stakeholders. As known TCPL is world's giant tea manufacturing company having host of other products to offer to consumers. This is a not-to-miss opportunity from TCPL for its stakeholders. 

ABOUT COMPANY:
Tata Consumer Products Ltd. (TCPL) is a food and beverage company with a diversified product portfolio and are present in multiple geographies globally. It classifies operations into branded business, non-branded business and businesses it conducts through joint ventures and associates. The company operates in a branded business that covers Tea, Coffee, Salt, Pantry platform, liquids platforms, mini meals, etc. on global front including the giant shares in domestic markets. It also operates in non-branded business like plantations (Primarily Coffee), and solubles (Tea and Coffee Extraction). 

The company also has joint ventures and associates i.e. Tata Starbucks Pvt. Ltd., Amalgamated Plantations Pvt. Ltd., Kanan Devan Hills Plantations Co. Pvt. Ltd.  Further, on January 12, 2024, it entered into a share purchase agreement with Capital Foods Private Limited ("Capital Foods"), Artal Asia Pte. Limited, General Atlantic Singapore CF Pte. Limited, Ajay Gupta and Wildflower Private Trust and acquired 75% equity interest of Capital Foods effective from February 1, 2024, while the remaining 25% will be acquired within the next three years. Capital Foods owns the brands 'Ching's Secret' and 'Smith & Jones'. The company also entered into a share purchase agreement with Organic India Private Limited ("Organic India") and Fabindia Limited on January 12, 2024 and acquired 99.99% equity interest of Organic India, which has organic brands in the food and beverages and herbal and traditional supplements categories.

As of March 31, 2024, it had 4500 employees across its operations and contract labourers as and when required for its plantation business. Its matter of lease agreement for Tetley facility at Cochin expired on December 31, 2015, and has not been renews since then, it under mediation and its adverse verdict may pose disruption of its business. According to the company, they have not witnessed any significant disruption on this count in the two preceding fiscals.  

TCPL's product portfolio spans various brands such as 'Tata Tea', 'Tetley', 'Teapigs, 'Good Earth', 'Eight O' Clock', 'Tata Coffee Grand', 'Himalayan' 'Tata Salt', 'Tata Sampann', Tata Gluco Plus', 'Tata Copper+' and 'Tata Soulfull'. According to the company, its continuing to develop awareness of brands, through focused and consistent branding and marketing initiatives, among retail consumers and institutional customers, is important for its ability to increase sales volumes and revenues, grow its existing market share and expand into new markets.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 36647492 equity shares of Re. 1 each at a fixed price of Rs. 818 per share to mobilize Rs. 2997.77 cr. The RI opens for subscription on August 05, 2024, and will close on August 19, 2024. The company is offering RI in the ratio of 1 for 26 shares held by its eligible stakeholders as of the record date of July 27, 2024.The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 20.49 cr. for this RI process and from the net proceeds, it will utilize Rs. 2940.00 cr. for repayment in full or buyback of the commercial papers issued/refinanced by the company for financing acquisitions of the acquired companies, and Rs. 37.28 cr. for general corporate purposes.
This RI is jointly managed by Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd., HSBC Securities and Capital Markets India Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up capital of Rs. 95.28 cr. will stand enhanced to Rs. 98.95 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 80939.65 cr. 

FINANCIAL PERFORMANCE:
Onn the financial performance front, for the last two fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs.  13952.04 cr./ / Rs. 1346.52 cr. (FY23), and Rs. 15451.47 cr. / Rs. 1300.99 cr. (FY24). It suffered a minor setback for FY24 on account of higher provisioning for depreciation, amortization, and exceptional item. 

DIVIDEND POLICY:
The company has declared a dividend of 845% for FY23 and 775% for FY24.  It will continue a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 500800 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 1223.65 on July 25, 2024, and opened on an ex-right basis at Rs. 1217.95 on July 26, 2024. Since then, it has marked a high/low of Rs. 1220.90 / Rs. 1166.30. The scrip last closed at Rs. 1193.60 as of August 02, 2024. For the last 52 weeks' it has posted a high/low of Rs. 1254.36/ Rs. 817.32. 

The promoters' holding has been constant at 33.55% for the last three quarters ended with June 30, 2024. The counter is well managed above the RI value. 

NOTE: My family has small holding in this company and will apply for this RI, as per eligibility.