Tata Consumer Products Ltd’s consolidated EBITDA increased almost 28% year-on-year in the December quarter (Q3FY26) to ₹721 crore, with its margin expanding 140 basis points (bps) to 14.1%. The growth rate looks impressive partly because Q3FY25 profitability had suffered due to high input prices of tea, which were passed on in Q4FY25.
The volatility in the tea business has forced Tata Consumer to stay focused on the performance of ‘growth’ businesses, which are essentially the branded segments in India other than tea and salt. They include Tata Sampann, Tata Soulfull, ready-to-drink (RTD) products (Tata Gluco+, Tata Copper+, Himalayan), Capital Foods (Ching’s Secret and Smith & Jones) and Organic India.
In Q3FY26, the growth businesses clocked the highest revenue increase in at least the past seven quarters, at 29%. This was largely volume-led growth across categories with Tata Sampann at 45% and RTD at 26% the notable ones.
The growth businesses have now achieved a quarterly run-rate of ₹1,000 crore, though their profitability has not been disclosed separately. The company maintains the common overhead cost across all businesses makes it difficult to ascertain the EBITDA margin for each business.
Tata Consumer’s consolidated Q3FY26 revenue grew 15% year-on-year. The India-branded business, contributing 62% of total segment revenue, reported 15% volume growth, with the Ebit margin expanding 507 bps to 12.5% after the passthrough of tea prices.
However, the international Ebit margin fell by 167 bps to 12.3% as higher coffee prices hurt profitability. The company increased coffee prices in January to pass on the higher raw material costs, which should help in increasing the Ebit margin in Q4.
Valuation focus
Compared to other FMCG companies, a low base can help Tata Consumer grow faster. But even if its growth businesses achieve the management’s guided rate of 30% per annum till FY28, Tata Consumer’s stock valuation seems to have already captured the growth till FY28.
The Street initially cheered the company’s Q3FY26 results, but the gains fizzled out on Wednesday as the focus shifted to valuation. Based on Bloomberg consensus estimates for FY28, Tata Consumer trades at a price-to-earnings multiple of 46x versus 42x for Hindustan Unilever Ltd, India’s largest FMCG company.
Investors must also see the valuation premium in the context of the former’s projected FY28 RoE at 10% versus the latter’s 26%.
