Tata Consumer Products branded portfolio drives earnings growth and margin expansion

Investment View and Earnings Outlook

Motilal Oswal Financial Services Limited (MOFSL), in its July 25, 2026 results update, retained its Buy recommendation on Tata Consumer Products. The view is supported by earnings growth in the Indian branded business, momentum in the growth portfolio and expectations of sustained margin expansion.

The broker believes Tata Consumer Products can maintain double-digit growth through approximately 25-30% growth in the growth portfolio, mid-single-digit volume growth in Indian tea, 5-7% growth in salt and healthier US international-business performance as coffee prices normalise.

1QFY27 Financial Performance

Tata Consumer Products reported consolidated revenue of Rs 5,350 crore in 1QFY27, up 12% year on year and in line with MOFSL estimates. EBITDA increased 19% year on year to Rs 720 crore, also in line with estimates. EBITDA margin expanded 80 basis points year on year to 13.5%, supported by a 260-basis-point improvement in gross margin to 42.7% from 40.1% in 1QFY26. Adjusted EPS rose to Rs 4.67 from Rs 3.73 a year earlier.

Overall EBIT increased approximately 27% year on year, led by 36% growth in Indian branded-business EBIT and approximately 13% growth in international-business EBIT.

Indian Branded Business and Growth Portfolio

The Indian branded business delivered revenue of Rs 3,540 crore, up 13% year on year, while EBIT increased 36% to Rs 390 crore.

NourishCo ready-to-drink revenue rose approximately 41% to Rs 380 crore, supported by 35% volume growth. Growth businesses, comprising RTD, Capital Foods and Organic India, grew 47%, while Tata Sampann increased 58%. Sampann's core portfolio grew 30%, with traction in dry fruits, cold-pressed oils, pulses and spices. Organic India and Capital Foods together grew 35%. Management has guided for approximately 25-30% growth in the growth business over the coming quarters.

Tea, International and Non-Branded Businesses

Management stated that Indian tea volumes increased approximately 2% despite LPG-related disruption and an unusually intense summer. Tea input costs were approximately 7-10% higher. Tata Consumer Products took a price increase in June and intends to implement calibrated pass-throughs to protect margins while balancing affordability and volume growth.

International branded-beverages revenue grew 17% to approximately Rs 1,340 crore, while EBIT increased 13% to Rs 180 crore. The international business grew 16%, or 3% in constant-currency terms. The US grew 7% in constant currency and margins expanded as coffee prices normalised. In contrast, UK revenue declined 2% in constant currency because of weak everyday black-tea demand during an intense summer.

Non-branded revenue declined 7% to approximately Rs 490 crore, while EBIT fell 24% to Rs 49 crore, principally because of lower global coffee prices. Soluble revenue declined 12% and plantations revenue declined 8%.

Innovation, Starbucks and Margin Drivers

Management launched 14 products in 1QFY27 and indicated a robust pipeline for the rest of FY27. RTD added two Kombucha Zero variants. Starbucks revenue grew approximately 11%, with margin expansion from operating leverage. Four cafés were added, and management guided for high single-digit business growth.

Advertising and promotion spending in India was 6.1% of sales. MOFSL expects margin expansion from premiumisation, innovation, better go-to-market execution, e-commerce penetration and a rising contribution from higher-margin growth and health-and-wellness categories.

Estimates and Valuation

MOFSL largely maintained its FY27E and FY28E estimates, raising adjusted PAT by 2% for each year while leaving revenue and EBITDA estimates broadly unchanged. It forecasts FY26-28 revenue, EBITDA and PAT CAGRs of 10%, 16% and 21%, respectively.

MOFSL's sum-of-the-parts target price is Rs 1,500. The valuation assigns 38 times FY28E EV/EBITDA to the India branded business, 13 times to the international branded business, 13 times to the non-branded business and values Starbucks through a DCF.

Key Developments to Monitor

• Tea-input inflation and the effectiveness of price pass-throughs.
• The impact of global coffee prices on the non-branded business.
• Demand trends for tea in the UK.
• Execution and sustained growth in the growth businesses.