Behind the Numbers: Why Tata Consumer's 59% Profit Jump Failed to Impress?

Despite delivering a 59% spike in its Q4 consolidated net profit, shares of Tata Consumer Products came under the heat of strong selling, plunging as much as 4.5% on April 24. Even though the company’s profit growth looks strong on the surface, the surge was largely fuelled by one-time exceptional gains, adjusting for which, TCPL’s bottomline would have fallen down.

Tata Consumer recorded an exceptional gain of Rs 45.32 crore for the March quarter, compared to a one-time loss of Rs 215.80 crore in the year-ago quarter. Its total tax benefit also rose nearly five times on year, giving the company’s profit a leg up. Without these one-time lifejackets, exceptional items, company’s consolidated net profit would have nosedived 31% on year during the March quarter, a back-of-the-envelope calculation shows, after adjusting for exceptional items from the present and base quarter.

On the other hand, the FMCG company’s revenue rose 17% in the fourth quarter of FY25. The company’s EBITDA also fell 1% on year during the quarter under review. 

While the overall margins remained under pressure during Q4, Motilal Oswal expects the operating performance for TCPL’s Indian business to recover going forward due to the price hikes taken by the company in its salt and tea portfolios, along with early visible signs of good tea crop. The price hike implemented by the company compensated 30% of cost increase for tea in FY25. The company said an expected softening of tea costs can help in the expansion of gross EBITDA margins.  If the tea costs softens from this year, then the company from Q2–Q3 can operate at a normative EBITDA margin of over 15%.

At 10:02 am, the stock has come off lows and traded 2.3% lower at Rs 1,124.10 on the NSE. Motilal Oswal, which has a ‘buy’ rating on the stock, has raised its target price by 18% to Rs 1,360, implying a 21% upside to the current market price.

On the other hand, Nuvama Institutional Equities raised the stock's target price by just over 6% to Rs 1,335, but cut its earnings per share estimates for FY26 and FY27 by 1.3% and 1.7%, respectively. The brokerage sees rising competitive intensity among existing players on the back of launches and competitive pricing.

Apart from reaping the incremental benefits of easing tea cost, the company will focus on clawing back the market share through volume growth going forward. Tata Consumer has guided for a mid-single digit volume growth in both tea and salt categories for FY26.

TCPL also remains optimistic over its future performance in the coffee category. The company said that India is likely to remain in an advantageous position even if the US decides to go ahead with its proposed import tariffs as coffee is not produced in the US and is not a discretionary item.

Elara Securities also added to the optimism, suggesting that Tata Consumer's India business have likely bottomed out, as the management expects softer tea prices due to better crop yields this season.

Yes Securities, on the other hand, has downgraded the stock to 'add' from 'buy', citing limited upside potential on a 1-year forward multiple. The brokerage, however, said it is fundamentally positive on the stock.