Tata Consumer's share price fell sharply on Monday after the company reported a mixed performance in Q2FY25. The firm witnessed a marginal increase of 0.9 per cent in its consolidated net profit to Rs 367.21 crore.
Tata Consumer Share Price: The shares of Tata's consumer arm declined by over 9 per cent on Monday after the company's Q2FY25 results failed to impress the D-street
Tata Consumer's share price fell sharply on Monday after the company reported a mixed performance in Q2FY25. The firm witnessed a marginal increase of 0.9 per cent in its consolidated net profit to Rs 367.21 crore.
Revenue from operations stood at Rs 4,214.45 crore marking a marginal rise of 12.87 per cent as compared to the corresponding period of the previous year.
At 1:00 pm, the shares of Tata's consumer arm were trading at Rs 1,015.15, down by nearly 7.14 per cent on the National Stock Exchange.
In the domestic market, revenue for Tata Consumer's India Beverages segment grew by just 3 per cent, largely owing to weak demand conditions. However, coffee maintained its strong momentum with a 29 per cent revenue surge.
On overall basis, the muted performance of the company was largely owing to the price action in the salt and tea segment.
The cost of tea has surged by roughly 25-30 per cent. These high prices are expected to remain elevated until the first quarter of next fiscal (FY26).
During the earnings call, the management highlighted that the rising cost of tea might hurt the demand levels.
The cost of tea has surged by roughly 25-30 per cent and is likely to stay high until the first quarter of FY26. While the company has increased prices to cover around 30 per cent of this rise, there is chance that prices might still impact demand levels.
Tata Consumer hasn't raised tea prices all at once because it wants to maintain its market share. If competitors also take a similar step and raise the prices, margins could improve by FY25.
As for the salt business, the company announced a minor hike of Rs 2 after nearly 2 years of flat pricing. This was largely done to mitigate the impact of cost inflation.
We believe increased competition coupled with slower growth in the urban markets are key near-term headwinds. However, we favor Tata Consumer for its wide product offerings and possible gains from distribution expansion, which would provide visibility on double-digit sales growth and margin expansion in the long term, Elara Securities stated in its report.