3QFY2013 Result Update | FMCG

February 4, 2013

Tata Global Beverages

Performance Highlights
Quarterly results - Consolidated
(` cr) Y/E March Revenue EBITDA OPM (%) PAT
Source: Company, Angel Research

NEUTRAL
CMP Target Price
Investment Period
% yoy 6.1 8.9 26bp 15.3 2QFY13 1,843 143 7.8 130 % qoq 3.2 32.8 222bp (29.1)

`145 -

3QFY13 1,902 190 10.0 92

3QFY12 1,793 174 9.7 80

Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 8,973 (100) 0.9 182/100 520,560 1 19,751 5,987 TGBL.BO TGBL@IN

For 3QFY2013, Tata Global Beverages (TGBL) posted a 15.3% yoy growth in its bottom-line aided by superior operating performance. We maintain our Neutral view on the stock. Key highlights: TGBL posted a 6.1% yoy growth in top-line to `1,902cr aided by favourable foreign currency translation impact, and was in-line with our estimates. The tea business posted a 9.3% yoy growth in top-line to `1,421cr, aided by a strong performance, both in India as well as in other markets such as Canada and Australia. The coffee business posted a marginal 1.2% yoy decline in its sales to `481cr. Despite a lower top-line, the coffee business posted a 20.1% yoy growth in its profits, aided by lower raw material costs and lower expenditure on advertisement. TGBLs OPM rose by 26bp on a yoy basis to 10% aided by selective price hikes and 238bp yoy decline in advertisement expenditure/sales ratio. Outlook and valuation: TGBL derives ~65% of its revenue from overseas operations. While the company is expected to perform well in the South Asian, Canada and Australian markets, the prolonged slowdown in Europe is a concern. Over FY2012-14, we expect the company to post a CAGR of 10.2% and 22.7% in its top-line and bottom-line, respectively. At the current market price, the stock is trading at 17.9x FY2014E earnings. We maintain our Neutral view on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 35.2 19.1 20.8 24.9

Abs. (%) Sensex TGBL

3m 5.3 (8.5)

1yr 12.2 21.8

3yr 21.7 54.5

Key Financials (Consolidated)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 5,982 3.4 245 (37.3) 9.8 4.0 36.6 2.3 6.5 7.7 1.4 14.4

FY2012 6,585 10.1 333 36.0 8.8 5.4 27.0 2.0 7.9 7.1 1.3 15.0

FY2013E 7,272 10.4 424 27.3 9.1 6.9 21.2 1.9 8.9 8.0 1.2 12.7

FY2014E 7,999 10.0 502 18.4 9.5 8.1 17.9 1.7 9.8 9.0 1.0 10.9

V Srinivasan
022-39357800 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

TGBL | 3QFY2013 Result Update

Exhibit 1: Quarterly performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation & Amortisation Other Income Recurring PBT Extraordinary (Income)/Expense PBT after Extra-ordinary items (% of Sales) Provision for Taxation (% of PBT) Minority Interest Profit/ Loss from Associates PAT PATM Equity shares (cr) EPS (`)
Source: Company, Angel Research

3QFY13 1,902 930 48.9 188 9.9 595 31.3 1,712 189.7 10.0 23.8 25 31 172 12 160 8.4 67 41.9 18.0 5.3 92 5 62 1.5

2QFY13 1,793 871 48.6 176 9.8 572 31.9 1,619 174.1 9.7 23.2 24 30 157 16 141 7.8 59 42.0 18.4 0.9 80 4 62 1.3

% chg (yoy) 6.1 6.8 6.2 4.0 5.8 8.9 26bp 2.9 3.4 4.4 9.8 13.8 13.3

2QFY13 1,843 937 50.8 177 9.6 586 31.8 1,700 142.8 7.8 11.0 25 52 159 11 148 8.0 20 13.5 20.7 11.7

% chg (qoq) 3.2 (0.7) (3.8) 6.0 2.7 1.4 (1.7) 0.7 32.8 222bp 117.4 (1.9) (41.2) 8.1 8.1 4.7 235.8

9MFY2013 5,459 2,732 50.0 538 9.9 1,686 30.9 4,956 503 9.2 56 75 112 485 28.7 456 8.4 136 29.9 53.2 10.5

9MFY2012 4,861 2,486 51.1 491 10.1 1,484 30.5 4,461 400 8.2 56 71 112 384 (62.0) 447 9.2 113 25.2 36.5 4.6 240 5 62 3.9

% chg 12.3 9.9 9.5 13.6 11.1 25.8 99bp (0.2) 5.3 0.5 26.0 2.1 20.8

15.3

130 7 62

(29.1)

306 6 62

27.4

15.3

2.1

(29.1)

4.9

27.4

Exhibit 2: 3QFY2013 Actual vs Angel estimates

(` cr) Revenue OPM (%) PAT
Source: Company, Angel Research

Actual 1,902 190 92

Angel Est 1,910 162 110

% Diff (0.4) 16.8 (16.2)

February 4, 2013

TGBL | 3QFY2013 Result Update

Top-line grows by 6.1% yoy

TGBL posted a 6.1% yoy growth in its net sales to `1,902cr, aided by improved performance in some of its markets coupled with favourable foreign exchange translation impact. South Asia: TGBL posted a strong performance in this region, maintaining its volume and value market leadership of 19.9% and 21.5% respectively. In all, the company posted a 19% top-line growth in its South Asian operations for the quarter. Commodity cost increases were partly recovered through price hikes during the quarter.

USA: TGBLs operations in USA, carried out through subsidiary Eight O Clock Coffee reported a 5.1% yoy decline in sales to `352cr. However, more importantly, the profitability improved considerably due to favourable green coffee pricing. Australia: In the Australian market, there was an all-round improvement in
performance. The growth came from key consumers and new products launched. Canada: Six new variants were launched in the Canadian market. The Tata Tea brand increased retail listing. Single serve brewing machines, in collaboration with Tassimo, were launched during the quarter.

Europe: In Great Britain, the overall tea category has declined in the past twelve
months. However, the company has posted a strong growth in the upcoming green tea segment. Tea Pigs too grew by a healthy 45%. Countries in the rest of Europe such as Russia, Poland, France and Czech Republic have not delivered due to the recessionary trend in those regions.

Exhibit 3: Top-line performance

2,000 1,600 1,200 800 400 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Top-line (LHS) Source: Company, Angel Research yoy growth (RHS) 20.0 15.0 10.0 1,843 1,902 1,793 1,724 1,612 1,715 5.0 0.0 (5.0) (%)

(` cr)

1,374

1,448

1,558 1,602 1,456

February 4, 2013

TGBL | 3QFY2013 Result Update

Exhibit 4: Region-wise sales performance

3QFY13 USA Canada, South America and Australia GB & Africa Europe and Middle East South Asia Others Branded Operations Non-Branded operations Others and eliminations Total Operating Income
Source: Company, Angel Research 352 181 393 204 588 13 1,731 167 17 1,916

3QFY12
371 142 407 237 496 8 1,661 139 1 1,801

%chg yoy
(5.1) 27.5 (3.4) (13.9) 18.5 62.5 4.2 20.1 1600.0 6.3

2QFY13
393 154 403 174 516 10 1,650 191 20 1,861

%chg qoq
(10.4) 17.5 -2.5 17.2 14.0 30.0 4.9 (12.6) (15.0) 2.9

9MFY13
1,091 423 1,172 553 1,641 36 4,916 531 54 5,501

9MFY12
1,017 342 1,040 572 1,445 19 4,435 425 37 4,897

% chg
7.3 23.7 12.7 -3.3 13.6 89.5 10.8 24.9 45.9 12.3

Exhibit 5: Segmental performance

Y/E March (` cr) Sales Tea Coffee and Other Produce Others Unallocated Net Income from operations EBIT Tea Coffee and Other Produce Others Total EBIT (%) Tea Coffee and Other Produce Others
Source: Company, Angel Research 10.3 14.7 (73.7) 10.6 12.1 (32.1) 7.2 15.7 (43.8) 10.0 14.6 (39.8) 9.7 10.9 (33.7) 146 71 (10) 208 138 59 (4) 193 5.8 20.2 0.0 7.4 95 84 (7) 172 54.8 (15.6) 0.0 20.5 397 218 (21) 594 341 145 (13) 472 16.4 50.6 0.0 25.8 1,420 482 14 0 1,916 1,300 488 14 0 1,801 9.3 (1.2) (0.2) (60.0) 6.3 1,311 535 15 0 1,861 8.4 (10.0) (9.5) 0.0 3.0 3,961 1487 53 0 5,501 3,525 1332 40 1 4,897 12.4 11.7 33.0 (38.9) 12.3

3QFY13

3QFY12

%chg yoy

2QFY13

%chg qoq

9MFY13

9MFY12

% chg

OPM at 10.3%
Although tea prices were ruling higher during the quarter, selective price hikes taken by the company and decline in prices of coffee resulted in only a marginal 43bp yoy decline in gross margins. The companys advertising expenses as a percentage of sales fell by 238bp during the quarter, thereby aiding marginal expansion in OPM. The OPM for the quarter stood at 10.3%. For 3QFY2013, TGBL posted a 15.3% yoy growth in its consolidated net profit aided by an 8.9% growth in its operating profit.

February 4, 2013

TGBL | 3QFY2013 Result Update

Exhibit 6: OPM performance

12 10 8 (%) 6 4 2 0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Source: Company, Angel Research 8.7 6.3 10.7 9.6 8 7.3 10.3 9.6 7.8 6.6 10

Investment rationale
Growth opportunity: TGBL holds a strong growth potential with increasing consumption of healthy beverages in India and globally. Acquisitions and strategic partnerships with global beverage giants like PepsiCo and Starbucks offer a huge market potential for TGBL, as it can develop and market products in local as well as global markets. The TGBL Starbucks JV recently inaugurated the first store of Starbucks Coffee Tata Alliance in Mumbai. The JV plans to scale up its operations quickly going ahead. Through its JV with Pepsico, TGBL has also entered the water business. It has launched two brands Tata Gluco Plus and Tata Water Plus in select cities in India. The initial response to the water brands has been encouraging with Tata Water Plus becoming the largest selling bottled water company in Chennai. Focus on branded products to lead to healthy margins: TGBL has shifted its focus from plantation activities to branded beverages. In the long run this is expected to lead to rationalization in its operating cost structure leading to healthy operating margins. While TGBLs focus on volume growth remains intact, selective price increases and stable ad spends will further aid in margin improvement.

Outlook and valuation

TGBL derives ~65% of its revenue from overseas operations. While the company is expected to perform well in the South Asian, Canada and Australian markets, the prolonged slowdown in Europe is a concern. Over FY2012-14, we expect the company to post a CAGR of 10.2% and 22.7% in its top-line and bottom-line respectively. At the current market price, the stock is trading at 17.9x FY2014E earnings. We maintain our Neutral rating on the stock.

February 4, 2013

TGBL | 3QFY2013 Result Update

Exhibit 7: One-year forward PE

50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Sep-10 Sep-11 Sep-12 Jan-10 Jan-11 Jan-12 Nov-10 Nov-11 May-10 May-11 May-12 Nov-12 Mar-10 Mar-11 Mar-12 Jan-13 Jul-10 Jul-11 Jul-12 (x)

Source: Bloomberg, Angel Research; Note: Blue line represents 3-yr average

Exhibit 8: Peer valuation

Company Asian Paints Britannia Colgate Dabur GCPL GSKCHL* HUL ITC Marico Nestle* TGBL Reco Neutral Buy Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Mcap (` cr)
44,443 5,630 18,248 23,226 25,456 16,034 100,780 239,947 13,771 45,543 8,973

CMP (`)
4,633 471 1,342 133 748 3,813 466 307 224 4,723 145

TP (`)
584 -

Upside (%)
24 -

P/E (x) FY13E

37.9 25.8 35.0 29.6 35.9 37.7 30.9 32.7 34.8 41.8 21.2

EV/Sales (x) FY13E

3.8 0.9 5.6 3.8 4.2 4.8 3.8 7.9 2.9 5.3 1.1

RoE (%) FY13E

36.4 39.1 104.6 43.4 23.7 36.3 84.5 35.1 25.4 71.2 8.9

CAGR # Sales
17.6 15.3 15.4 16.6 26.3 16.1 15.5 17.4 18.6 16.0 10.2

FY14E
31.5 19.1 29.8 24.4 27.6 32.2 27.5 27.7 27.6 33.2 17.9

FY14E
3.2 0.7 4.9 3.2 3.4 4.0 3.3 6.8 2.4 4.4 1.0

FY14E
35.0 42.7 97.0 44.0 26.3 31.9 75.8 35.1 22.6 60.3 9.8

EPS
19.4 25.6 17.1 21.6 29.9 18.3 19.3 18.7 28.1 16.1 18.8

Source: Company, Angel research; Note: # Denotes CAGR over FY2012-14E, *December Year Ending.

Company background
TGBL is a global beverage company headquartered in London. The company has a strong portfolio of global and regional brands such as Tata Tea, Tetley, Eight OClock Coffee, Good Earth, Jemca, Grand Vitax and Himalayan. During the past decade, TGBL has made acquisitions in various countries in the tea, coffee, water and other beverages categories. Tea constitutes more than 70% of the companys total turnover; coffee constitutes an ~19% share; and the rest is accounted by other activities. About 65% of the companys sales are from outside India from countries such as the US, UK, Czech Republic and Poland.

February 4, 2013

TGBL | 3QFY2013 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr) Net Sales Total operating income % chg Total Expenditure Cost of Materials Advertising Exp Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Prior Period & Extr. Exp./(Inc.) PBT (reported) Tax (% of PBT) PAT (Adjusted) Add: Share of earnings of asso. Less: Minority interest (MI) Adj. PAT after MI (reported) % chg Reported PAT (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 4,848 4,848 12.5 4,224 1,753 880 554 1,036 624 12.2 12.9 99 526 13.1 10.8 210 215 40.6 531 (74.6) 725 1,256 424 79.9 107 25 156 (25) 701 14.5 (0.4) (0.4) 0.0 5,783 5,783 19.3 5,269 2,310 1,317 611 1,031 514 (17.7) 8.9 103 411 (21.9) 7.1 149 379 59.2 641 20.7 8 649 248 38.6 393 33 36 390 399 6.9 6.3 6.3 0.0 5,982 5,982 3.4 5,395 2,928 1,013 615 840 587 14.4 9.8 99 488 18.8 8.2 121 118 24.3 485 (24.3) 10 494 202 41.7 283 20 58 245 (37) 254 4.3 4.0 4.0 (37.4) 6,585 6,585 10.1 6,009 3,323 1,100 675 911 576 (1.9) 8.8 96 480 (1.6) 7.3 70 140 25.5 550 13.5 23 573 142 25.7 409 (15) 61 333 36 355 5.4 5.4 5.4 35.7 7,272 7,272 10.4 6,610 3,672 1,163 771 1,004 662 14.8 9.1 106 555 15.6 7.6 68 146 23.1 634 15.1 634 171 27.0 463 30 69 424 27 424 5.8 6.9 6.9 27.3 7,998 7,998 10.0 7,239 4,016 1,280 848 1,096 759 14.7 9.5 117 642 15.6 8.0 61 143 19.8 725 14.4 725 171 23.6 554 30 82 501 18 501 6.3 8.1 8.1 18.4

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

February 4, 2013

TGBL | 3QFY2013 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Long term Provisions Other long term liablities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 62 3,591 3,653 1,022 2,431 48 7,154 1,442 707 735 63 3,027 351 4,587 1,089 2,303 1,194 1,617 2,970 8 7,154 62 3,662 3,723 1,057 1,797 75 6,652 1,470 752 718 47 2,929 519 3,998 1,904 653 1,441 1,560 2,438 6,652 62 3,895 3,957 1,108 1,041 64 88 164 6,423 1,538 842 697 44 3,062 591 91 3,280 997 717 1,565 1,342 1,938 6,423 62 4,504 4,566 1,066 916 66 174 156 6,943 1,731 956 775 49 3,469 600 86 3,300 736 820 1,744 1,336 1,964 6,943 62 4,770 4,832 1,066 816 66 174 156 7,109 1,899 1,063 836 47 3,469 694 86 3,448 743 848 1,857 1,471 1,978 7,109 62 5,116 5,177 1,066 716 66 174 156 7,354 2,089 1,180 909 52 3,469 718 86 3,675 739 873 2,063 1,556 2,119 7,354

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

February 4, 2013

TGBL | 3QFY2013 Result Update

Cash Flow Statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
previous year numbers

FY2009 FY2010 FY2011 FY2012 531 99 381 154 424 (1,605) (864) (68) 1,155 1,087 (178) 125 154 (457) (234) 1,323 1,089 641 103 42 91 248 (326) 303 (89) 1,472 1,384 (634) 146 91 (871) 815 1,089 1,904 485 99 (284) 45 202 (125) 18 (85) 5 (81) (63) (591) 145 45 (845) (907) 1,904 997 550 96 (69) 2 142 (232) 205 (198) (10) (208) 0.1 (134) 123 2 (259) (261) 997 736

FY2013E 634 106 (92) (20) 171 (39) 418 (166) (93) (259) (100) 119 (20) (199) (40) 736 743

FY2014E 725 117 (248) (24) 171 (38) 361 (195) (25) (219) (100) 119 (24) (195) (53) 743 739

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

February 4, 2013

TGBL | 3QFY2013 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE Angel ROIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days)
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E (363.3) 43.5 2.5 1.2 2.1 15.9 1.4 (0.4) (0.4) 3.3 1.8 58.5 7.4 3.0 3.5 49 34 88 95 22.9 17.8 2.4 1.4 1.4 16.2 1.3 6.3 6.3 8.1 2.0 59.6 6.2 10.8 4.1 53 31 83 76 36.6 25.3 2.3 1.4 1.4 14.4 1.3 4.0 4.0 5.7 2.0 63.4 7.7 6.5 4.0 61 33 74 45 27.0 19.9 2.0 1.5 1.3 15.0 1.3 5.4 5.4 7.3 2.1 73.1 7.1 7.9 3.9 62 34 59 60 21.2 16.9 1.9 1.5 1.2 12.7 1.2 6.9 6.9 8.6 2.2 77.5 8.0 8.9 3.9 60 34 57 62 17.9 14.5 1.7 1.5 1.0 10.9 1.2 8.1 8.1 10.0 2.2 83.0 9.0 9.8 3.9 60 35 56 60

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

February 4, 2013

10

TGBL | 3QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Tata Global Beverages No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

February 4, 2013

11