Tata Consumer Products (TCPL) shares fell by 2% to Rs 693.05 on Monday’s intra-day trade after the company stopped negotiating with Bisleri for a potential acquisition. The Tata Group subsidiary began talks with the Chauhan family two years ago, but called off negotiations last week. Ramesh Chauhan, the chairman of Bisleri International, had announced last November that he was in discussion with TCPL to sell a majority stake in the company for Rs 6,000-7,000 crore, and he expected the deal to be completed in 7-8 months. However, TCPL announced on March 17, 2023, after market hours that it had ceased negotiations with Bisleri and had not signed any definitive agreement or binding commitment on the matter.
In the past three months, TCPL has underperformed the market, falling by 14%, compared to nearly 7% decline in the S&P BSE Sensex. In the past one year, it slipped 10%, as against 1% fall in the benchmark index. The company hit a 52-week low of Rs 685 on March 16, 2023.
TCPL is a major fast-moving consumer goods (FMCG) company in India, the UK, the US, Canada, and other geographies, selling tea, coffee, and other beverages. It also sells salt, pulses, spices, and other food products in India, and its subsidiary NourishCo is present in packaged water and other beverages. TCPL is in a joint venture with Starbucks, which has 311 stores in India.
According to analysts TCPL has faced a challenging macro environment that has affected its volumes in India and internationally. However, the brokerage firm expects margin improvement due to the delayed impact of pricing in international business, premiumization efforts, and cost rationalization.
Similarly, analysts at ICICI Securities believe the company would be able to grow its newer food categories at a faster pace in the long run, offsetting the impact of slower-growth categories such as tea and salt and a stagnant international business. The brokerage firm also believes that aggressive expansion in Starbucks would result in strong cash flow generation in the next three to four years, with many existing stores gaining maturity.
The stock has witnessed a gradual decline since mid-December 2022 on the weekly chart and is now fairly oversold. On the downside, one should keep a close eye on Rs 680, as sustained trade below the same could further weaken the stock towards the Rs 660 level.