Initiating coverage | FMCG

December 19, 2011

Tata Global Beverages

Poised to perform
Tata Global Beverages Limited (TGBL) is an emerging player in the global beverage market. The company has made a strategic shift from being a local tea company to a global beverage company through various acquisitions and strategic partnerships with global beverage giants like PepsiCo and Starbucks. As a result, the company has made an entry into the top 10 global companies list in the hot drinks category, posing a challenge to global players like Nestl, Unilever and Kraft Foods. The companys product portfolio comprises leading global brands like Tetley, Eight O Clock and local brands like Tata Tea. Bottomed-out margins; expect a positive surprise: We model in TGBLs OPM to improve by ~150bp over FY2011-13E from 8.6% in FY2011 to ~10.1% in FY2013E, driven by a shift in the companys focus from the plantation business to branded products and rationalization in the operating cost structure. While TGBLs focus on volume growth remains intact, selective price increases and stable ad spends will further aid in margin improvement. Also, with the Tea Board of India estimating higher tea production in 2011 as compared to 2010 (~5% higher production), we expect auction prices of tea to soften, thereby providing a relief to the company from heightened input cost pressure. Estimate ~40% plus adjusted EPS CAGR over FY2011-13E: We model a ~40% EPS CAGR over FY2011-13, led by (1) 9% revenue growth and (2) a ~150bp margin improvement. We believe the company is set to outperform the industrys growth, with the help of selective price increases and strong brands like Tata Tea Premium, Tata Tea Gold, Agni Dust and Kanan Devan. Key valuation trigger: Despite its leadership position in the Indian packaged tea market, No. 2 position in the global tea market and generating ~90% of its total revenue from branded products, TGBL is trading at 12.2x FY2013E EPS (which is at a discount to its FMCG peers, trading at 20x35x FY2013E EPS). Also, on EV/Sales basis, the stock is trading at 0.6x FY2013E EV/Sales (historical average of 1x EV/ Sales). Hence, we initiate coverage on the stock with a Buy recommendation and a target price of `97, based on 14x FY2013E EPS of `6.9(0.8x FY2013 EV/Sales).

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 5,219 1.0 120/80 294,179 1 15,391 4,613 TAGL.BO TGBL@IN

`84 `97
12 Months

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 35.2 33.4 9.8 21.6

Abs. (%) Sensex TGBL

3m

1yr

3yr 52.7 54.8

(10.0) (22.5) (7.8) (26.4)

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

FY2010 5,784 19.3 390 73.2 8.9 6.2 14.5 1.5 10.4 6.2 0.9 10.8

FY2011 5,984 3.5 254 (34.8) 8.6 3.4 26.4 1.4 5.4 6.7 0.8 8.9

FY2012E 6,522 9.0 336 32.1 9.2 5.4 16.6 1.4 8.4 8.0 0.7 8.6

FY2013E 7,110 9.0 427 27.2 10.1 6.9 12.2 1.3 10.2 9.6 0.6 8.6

Sreekanth P.V.S 022-39357800 Ext: 6841 sreekanth.s@angelbroking.com

Please refer to important disclosures at the end of this report

Tata Global Beverages | Initiating coverage

Investment thesis
Fast emerging global beverage player
Among the top 10 global players in the hot drinks category, posing a challenge to Nestl, Kraft Foods and Unilever, among others. TGBL, led by its various acquisitions in recent years, has become a global non-alcoholic beverage company. The company now features among the global top 10 players list in the hot drinks category. Exhibit 1: Top10 Global players (%Off-trade value) - Hot drinks category
Company Nestl SA Kraft Foods Inc. Unilever Group Sara Lee Corp Tchibo GmbH Tata Global Beverages Ltd Associated British Foods Plc (ABF) JM Smucker Co, The Strauss Group Ltd Lavazza SpA, Luigi
Source: Euromonitor International, Angel Research

2005 15.1 7.9 4.5 3.2 1.8 1.4 0.1 1.2

2010 15.2 7.8 4.4 3.4 1.6 1.3 1.3 1.2 1.2 1.1

Spreading its wings across the globe

TGBL has a very ambitious plan to generate revenue of US$5bn by 2015, which it may fall short of due to the slow growth in its key categories (tea and coffee) and slowdown due to the ongoing global as well as local macroeconomic scenario. The company has a commanding position in the tea and coffee categories in North America and South Asia. With leadership positions in India, UK and Canada in the tea market, TGBL has been consistent in maintaining its market share. Exhibit 2: TGBLs increasing global footprint in beverages
1,800 1,600 1,400 1,200
(` cr)

1,000 800 600 400 200 0 USA Canada & UK & Africa Europe & South Asia Non Australia ME Branded 2011 2009 2010 Others

Source: Company, Angel Research

December 19, 2011

Tata Global Beverages | Initiating coverage

The company generates over 70% of its consolidated sales from outside India.

Branded products constitute 90% of the companys top line.

During FY2011, TGBL reported more than 70% of its revenue from outside India. The company has a leadership position in the tea and coffee markets in several countries. The company is the second largest global tea marketing company and the third largest player (post acquisition of Eight O Clock coffee through its subsidiary Tata Coffee) in the branded coffee market in the US. Exhibit 3: TGBLs country-wise sales of hot drinks in CY10 (% retail value)

21

26

19

10

24

India

Canada

USA

UK

Others

Source: Euromonitor International, Angel Research

Apart from being among the leaders in global tea markets, TGBLs leadership in the Indian tea market has also been increasing. Currently, iconic brands like Tata Tea, Kanan Devan and Tetley feature among the top tea brands in the country. Exhibit 4: Top tea brand shares in India (% retail value)
Brand Tata Tea Brooke Bond Duncans Lipton Wagh Bakri Kanan Devan Goodricke Twinings Golden Tips Girnar Jay Green Tea Tetley Kho-Cha Company TGBL HUL Duncans Industries HUL Wagh Bakri TGBL Goodricke Group Twinings Pvt Ltd Golden Tips Tea Co Girnar Food & Beverages Jay Shree Tea TGBL Kho-Cha Darjeeling Tea Bureau CY2010 19.7 19.1 8.6 6.2 3.5 3.3 1.5 1.2 1.1 1 0.7 0.5 0.2

Source: Euromonitor International, Angel Research

December 19, 2011

Tata Global Beverages | Initiating coverage

Bottomed-out margins; expect a positive surprise

We model in TGBLs OPM to improve by ~150bp over FY2011-13E from 8.6% in FY2011 to ~10.1% in FY2013E, driven by a shift in its focus from the plantation business to branded products business and rationalization in its operating cost structure. We expect a rejig in the companys cost structure due to the ongoing hiving off of the plantation business and expect staff cost, power and fuel cost and manufacturing expenses to come down going forward. While TGBLs focus on volume growth remains intact, selective price increases and stable ad spends will further aid in margin improvement. Exhibit 5: Changes in cost structure to improve OPM
45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
FY2007 FY2008 FY2009 FY2010 FY2011

(%)

FY2012E

RM Expenses SG&A Expenses

Source: Company, Angel Research

Staff Cost Manufacturing Expenses

Power & Fuel Cost Miscellaneous Expenses

Exhibit 6: We expect OPM to improve by ~150bp over FY2011-13E

800 700 600 500 18.0 16.0 14.0 12.0 8.0 6.0 4.0 2.0 10.0

FY2013E

400 300 200 100

FY2012E

EBITDA
Source: Company, Angel Research

OPM

December 19, 2011

FY2013E

FY2007

FY2008

FY2009

FY2010

FY2011

(%)

(` )

Tata Global Beverages | Initiating coverage

Also, with the Tea Board of India estimating higher production of tea in 2011 as compared to 2010 (~5% higher production), we expect auction prices of tea to soften, thereby providing a relief to the company from the heightened input cost pressure. It is estimated that tea production in India will cross 1,000mn kgs in 2011 with increased tea production from North India. Exhibit 7: Monthly estimated tea production for CY2011
CY2011 (000kgs) Total Assam Growth (yoy %) Total W. Bengal Growth (yoy %) Total North India Growth (yoy %) Total South India Growth (yoy %) All India Growth (yoy %) Jan 3,426 (37) 2,934 (8) 6,412 (26) (21) (23) Feb 114 (39) (34) (4) (7) Mar 60 (4) 28 (3) 16 April (3) 27 3 17 7 May 9 10 9 (3) 5 June 62,824 24 25,955 2 16 25,251 (7) 10 July 76,311 14 33,934 (1) 9 21,329 5 8 Aug 84,080 7 27,148 (1) 5 14,250 (4) 3 Sept 66,962 7 23,762 (2) 93,062 4 17,999 (2) 3 Oct 70,467 (2) 22,973 (10) 95,039 (4) 22,458 4 117,497 (3) Jan to Oct 455,826 9 184,263 648,998 6 198,160 (2) 847,158 4 94 23,669 37,025 30,968 909 14,364 11,954 20,330 1,004 38,137 49,451 51,738

89,458 111,940 112,757

14,518 15,728 18,595 23,593 24,439

20,930 16,732 56,732 73,044 76,177 114,709 133,269 127,007 111,061

Source: Indian Tea Board, Angel Research

Exhibit 8: Mombasa tea auction price (`/kg)

200 180 160 140 120 100 80 60 40 20 0
Jan-95 Sep-95 May-96 Jan-97 Sep-97 May-98 Jan-99 Sep-99 May-00 Jan-01 Sep-01 May-02 Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11

Exhibit 9: India Tea price - signs of cooling down (`/kg)

250 200 150
(`)

( `)

100 50 0
Feb-09 Feb-10 May-08 May-10 May-09 Feb-11 May-11 Aug-10 Aug-08 Aug-09 Nov-08 Nov-09 Aug-11 Nov-10 Nov-11

Mombasa Tea Auction Price

Source: Industry, Angel Research

Indian Tea Price

Source: Indian Tea Board, Angel Research

December 19, 2011

Tata Global Beverages | Initiating coverage

Exhibit 10: Increase in tea plantation acreage to increase production

Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Indian Tea Board, Angel Research

Area (hectares) 383,629 394,170 396,066 398,453 399,964 407,647 411,335 414,347 414,953 416,269 420,470 420,289 418,363 425,966 427,065 431,204 434,294 474,027 490,200 504,366 509,806 515,832 519,598 521,403 523,000 567,020 578,458 NA NA NA NA

Production (000 kgs) 560,427 560,562 581,484 639,864 656,162 620,803 665,251 700,014 688,105 720,338 754,192 732,322 760,826 752,895 756,016 780,140 810,031 874,108 825,935 846,922 853,923 838,474 878,129 892,965 927,984 981,800 986,430 980,820 978,999 966,403 1000000E

Estimate ~40% plus adjusted CAGR over FY2011-13E

We model a ~40% EPS CAGR over FY2011-13, led by (1) 9% revenue growth and (2) a 150bp margin improvement. We believe the company is set to outperform the industrys growth with the help of selective price increases and strong brands like Tata Tea Premium, Tata Tea Gold, Agni Dust and Kanan Devan.

December 19, 2011

Tata Global Beverages | Initiating coverage

We estimate return ratios to improve

Despite being a leading player in the consumer space, TGBL (unlike its FMCG peers) does not have very high RoE and RoCE the reason being high goodwill (~50% of total assets in FY2011) in the balance sheet as a result of acquisitions over many years. Exhibit 11: RoCE to improve over FY2011-13E
(%) FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E Reported 7.5 6.6 6.0 6.2 6.7 8.0 9.6 Adjusted for goodwill 30.2 11.2 10.3 11.0 13.2 15.8 18.8 Adjusted for goodwill & cash 32.3 16.4 14.1 22.6 19.4 23.8 27.2

Source: Company, Angel Research

Revenue overview
TGBL has become a global non beverage player post its various acquisitions in many geographical regions. Though the companys key revenue generating product remains tea, it is also present in coffee though its subsidiary Tata Coffee Ltd. The company has recently started to expand its product portfolio by entering into other beverages. The company has recently entered into a JV with PepsiCo India Pvt. Ltd. to develop non-carbonated, ready-to-drink beverages focused on health and enhanced wellness for international markets. Exhibit 12: Category-wise sales breakup FY2011
8 2

Exhibit 13: Brand-wise sales breakup FY2011

12 1 39 17

19 1 1 71 Tetley Tea Coffee Plantations Others Eight O'Clock Indian Tea Brands Vitax 29 Good Earth Others Jemca

Source: Company, Angel Research

Source: Company, Angel Research

December 19, 2011

Tata Global Beverages | Initiating coverage

We expect the companys consolidated revenue to witness a ~9% CAGR over FY2011-13E, driven by modest volume growth and selective price hikes in the companys key categories tea and coffee. The tea industry has witnessed a number of changes over the years with changing consumer behavior due to changing lifestyles and increased awareness. Though tea remains the key focus area for TGBL, the company is focusing on expanding its footprint across the globe, strengthening its position in the global tea market and getting noticed in the global beverages category. Over the years, TGBL has grown inorganically considering the sluggish growth in the domestic tea market. Exhibit 14: Time line of acquisitions and JVs of TGBL
Year FY2000 FY2005 FY2006 FY2009 FY2011 FY2012 Company Tetley Good Earth, Inc., USA Eight O' Clock Coffee Company, USA Grand, Russia Rising Beverage Company Llc Nourishco Beverages Ltd (With PepsiCo India) Country UK USA USA Russia USA India

Source: Company, Angel Research

Exhibit 15: Brand portfolio of TGBL

Brands Tetley Vitax Jemca Phendula Tata Tea Eight OClock Grand Good Earth Himalayan T4 KIDZ Laager Activate Nourishco Sukk Category Black tea, herbal tea, fruit tea Fruit tea Black tea, green tea, herbal tea, fruit tea Tea Tea Coffee Coffee and tea Tea Mineral water Hot flavoured drink Tea Flavoured water Non carbonated RTD beverage Drinkable jelly snack Country UK and Canada Poland Czech South Africa India USA Russia USA India UK South Africa USA India & Intl. markets UK

Source: Company, Angel Research

December 19, 2011

Tata Global Beverages | Initiating coverage

Outlook and valuation

We estimate modest revenue growth at a ~9% CAGR over FY2011-13E on the basis of price and volume-led growth. Inspite of the slow revenue growth, we expect healthy expansion of 150bp in the companys OPM over FY2011-13E, from 8.6% in FY2011 to ~10% in FY2013E, due to changes in cost structure and selective price hikes in key products. Adjusted earnings for the company are expected to witness a robust ~40% EPS CAGR over FY2011-13E, primarily due to increased OPM. Despite its leadership position in the Indian packaged tea market, No. 2 position in the global tea market and generating ~90% of its total revenue from branded products, TGBL is trading at 13.3x FY2013E EPS (which is at a discount to its FMCG peers, trading at 20x35x FY2013E EPS). Also, on EV/Sales basis, the stock is trading at 0.6x FY2013E EV/Sales (historical average of 1x EV/ Sales). Hence, we initiate coverage on the stock with a Buy recommendation and a target price of `104, based on 16x FY2013E EPS of `6.5 (0.9x FY2013 EV/Sales). Exhibit 16: Trading at attractive 0.6x FY2013E EV/Sales
10,000 8,000

EV (` cr)

6,000 4,000 2,000

Dec-07

Dec-08

Dec-09

Dec-10

Aug-07

Aug-08

Aug-09

Aug-10

EV

1.3

1.1

0.9

0.7

0.5

Source: Angel Research

We believe the stock will be re-rated due to the following reasons:

Improvement in OPM and return ratios going forward The company has been taking initiatives to expand globally and emerge as a global beverage player. Going ahead, we believe higher revenue visibility from the recent JVs and further expansion in non-alcoholic beverages would result in higher revenue growth.

Key risk
Tea and coffee prices have been at their peaks and volatile. Any further hardening of key raw materials will negatively impact the companys margins and earnings.

December 19, 2011

Aug-11

Dec-11

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Tata Global Beverages | Initiating coverage

Tea market dynamics in India

According to a report by Euromonitor, tea over the past five years has witnessed over a 4% CAGR in volumes, with black tea contributing ~98% of volumes. Volumes of green tea have grown at a faster pace at ~10% in the past five years, with increasing awareness among consumers about the benefits of green tea. Exhibit 17: Category-wise volume sales of tea
Tea type (cr tones) Black Tea Green Tea Tea 2005 2,109 29 2,138 2006 2,171 31 2,202 2007 2,227 33 2,260 2008 2,310 35 2,345 2009 2,396 38 2,434 2010 2,472 42 2,514 CAGR (%) 15 10 15

Source: Euromonitor, Angel Research, CAGR over CY2005-10

In terms of value sales, tea has grown by ~15% over CY2005-10 due to higher demand, as tea remains the most preferred hot drink in most parts of India. Exhibit 18: Category-wise retail sales value of tea
Tea type (` cr) Black Tea Green Tea 2005 347.5 25.9 2006 368.3 27.8 2007 399.5 29.7 2008 463.2 31.6 2009 527.4 34.0 2010 608.5 37.8 CAGR (%) 4.1 9.2

Total Tea

373.4

396.1

429.1

494.9

561.4

646.3

4.1

Source: Euromonitor, Angel Research, CAGR over CY2005-10

During the past few years, changing consumer behavior and increased awareness about green tea have led to high growth in this category. Though the category is very small in terms of volume and value sales, it is gaining acceptance among consumers in the countrys major towns. The packaged tea market in India is dominated mainly by two players, HUL and TGBL, with both players competing neck to neck in terms of their market shares. TGBL has a vast presence in various price points. Tata Tea Premium and Tetley are its premium brands, whereas Agni Dust and Chakra Gold are the mass brands.

December 19, 2011

10

Tata Global Beverages | Initiating coverage

Company snapshot
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 a ~19% share; and the rest comes from other activities. Branded products constitute 90% of the companys annual turnover, with the remaining sales coming from B2B plantation and extraction activities. About 70% of the companys sales are from outside India in countries like US, UK, Czech Republic and Poland.

Key subsidiaries of TGBL

Exhibit 19: TGBLs key subsidiaries
Company Tata Global GB Ltd. Stansand (Africa) Ltd. OOO Sunty LLC Tata Coffee Ltd. Consolidated Coffee, Inc.
Source: Company, Angel Research

Country UK Kenya Russia India US

December 19, 2011

11

Tata Global Beverages | Initiating coverage

Exhibit 20: TGBL vs. local peers relative valuation

Company Asian Paints Britannia Colgate Dabur GSKCHL GCPL HUL ITC Marico
*

Reco
Accumulate Accumulate Neutral Buy Neutral Accumulate Neutral Accumulate Accumulate Neutral Buy

Mcap (` cr)
25,414 5,279 13,817 16,885 10,306 12,915 86,450 152,711 8,546 39,918 5,219

CMP (`)
2,650 442 1,016 97 2,450 399 396 197 139 4,140 84

TP (`)
3,030 495 115 457 320 219 151 3,603 104

Upside (%)
14 12 19 15 11 9 23

P/E (x) FY12E

25.8 28.7 31.5 24.1 29.6 24.1 33.9 26.5 27.7 41.0 16.6

EV/Sales (x) FY12E

2.7 1.0 5.2 3.3 3.4 3.2 3.8 5.9 2.4 5.5 0.7

RoE (%) FY12E

39.6 37.8 111.7 44.9 32.6 36.6 87.5 32.7 30.2 91.1 8.4

CAGR # Sales
17.3 17.3 14.9 20.5 20.1 22.9 12.7 17.6 17.2 16.1 9.0

FY13E
21.0 19.6 26.9 21.0 24.9 18.5 29.8 22.3 22.0 34.5 12.2

FY13E
2.3 0.9 4.5 2.9 2.9 2.6 3.3 4.9 2.1 4.7 0.6

FY13E
38.3 46.0 108.0 41.6 31.8 29.4 85.3 31.5 28.8 72.9 10.2

EPS
19.8 36.0 12.9 18.8 23.9 20.2 17.1 17.4 28.0 18.9 42.3

Nestl*
TGBL

Source: Angel Research, #Denotes CAGR over FY2011-13E, *Denotes December ending

Exhibit 21: TGBL vs. global non-alcoholic beverage companies

Company TGBL Tingyi Cayman Islands Holding Corp. Green Mountain Coffee Roasters, Inc. Dr. Pepper Snapple Group, Inc. Hansen Natural Corp. Arca Continental SAB de CV Yakult Honsha Co Ltd. Uni-President China Holdings Ltd. Ito En Ltd. Britvic PLC Cott Corp. Mcap (mn) 52,193
131,647 7,108 8,260 8,295 93,663 411,806 16,341 118,941 724 617

CMP
85 24 46 39 95 58 2,341 5 1,304 300 7

Curr. INR Yuan USD USD USD Peso Yen Yuan Yen Pound CAD

Country INDIA CHINA USA USA USA MEXICO JAPAN CHINA JAPAN BRITAIN CANADA

P/E (x)
16.6 15.4 27.8 17.4 13.1 25.7 16.4 28.2 20.2 18.6 8.4 12.2 14.0 21.9 12.6 12.1 21.6 13.6 25.5 14.3 16.9 7.6

EV/Sales (x)
0.7 0.89 1.71 1.86 1.74 4.18 1.85 1.28 0.58 0.42 0.90 0.6 0.81 1.35 1.39 1.68 3.41 1.69 1.22 0.48 0.38 0.86

RoE (%)
8.4 7.8 26.3 17.6 27.3 31.9 15.8 6.1 8.8 7.9 189.0 10.2 8.2 28.3 19.3 29.6 44.5 17.1 6.5 11.3 7.4 110.9

CAGR # EPS
9.0 42.3 7.7 21.3 36.7 32.2 45.3 58.0 5.7 9.8 30.4 23.0 46.6 27.4 2.9 16.5 52.3 33.0 2.8 (1.4) 4.0 27.7

FY12E FY13E FY12E FY13E FY12E FY13E Sales

Source: Bloomberg, # Denotes CAGR over CY2011-13E, CMP as on December 19, 2011

Exhibit 22: One-year forward PE band

160 140 120
Share Price ( ` )

Exhibit 23: TGBLs one-year return to the Sensex

110% 105% 100% 95% 90% 85% 80% 75% 70% 65% 60%

100 80 60 40 20 Dec-09 Dec-08 Dec-07 Dec-10 Mar-09 Mar-10 Mar-08 Mar-11 Dec-11 Jun-09 Jun-10 Jun-08 Sep-09 Sep-10 Jun-11 Sep-08 Sep-11

Dec-10

Mar-11

Aug-11

8x

12x

16x

20x

Sensex

May-11

TGBL

Source: Angel Research

Source: Angel Research

December 19, 2011

Nov-11

Dec-11

Jan-11

Feb-11

Apr-11

Jun-11

Sep-11

Oct-11

Jul-11

12

Tata Global Beverages | Initiating coverage

Profit and loss statement (Consolidated)

Y/E March (` cr) Gross sales Less: Excise duty Net Sales % chg Total Expenditure Cost of Materials Advertising Exp (Incl Promotion) Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Reported PBT % chg Prior Period & Extra Exp/(Inc.) PBT (recurring) Tax (% of PBT) PAT (reported) Add: Share of earnings of asso. Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) ADJ. EPS (`) Fully Diluted EPS (`) % chg FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 4,311 1.4 4,310 7.1 3,753 1,416 825 480 278 556 (14.1) 12.9 92 465 (15.7) 10.8 306 1,929 92.4 2,088 258.0 1,517 571 153 7.3 1,935 392 1,543 25 (92.3) 0.6 0.4 0.4 (92.3) 4,849 1.1 4,848 12.5 4,322 1,753 879 550 304 526 (5.6) 10.8 99 427 (8.2) 8.8 210 1,039 82.7 1,256 (39.8) 480 776 424 33.8 832 25 156 701 221 778.0 4.5 3.6 3.6 778.0 5,784 0.9 5,783 19.3 5,269 2,310 985 611 437 514 (2.3) 8.9 103 411 (3.8) 7.1 149 379 59.2 641 (49.0) 8 633 248 38.6 393 33 36 390 382 73.2 6.6 6.2 6.2 73.2 5,984 1.5 5,982 3.4 5,469 2,521 1,013 610 336 513 (0.0) 8.6 99 414 0.8 6.9 120 200 40.5 494 (22.9) 44 451 202 40.9 292 20 58 254 211 (44.8) 3.5 3.4 3.4 (44.8) 6,522 0.7 6,522 9.0 5,919 2,739 1,057 698 365 602 17.3 9.2 111 492 18.8 7.5 122 188 33.8 558 12.8 558 184 33.0 374 20 58 336 336 59.4 5.2 5.4 5.4 59.4 7,110 0.7 7,109 9.0 6,389 2,957 1,137 754 398 720 19.5 10.1 121 600 21.9 8.4 97 191 27.6 694 24.4 694 229 33.0 465 20 58 427 427 27.2 6.0 6.9 6.9 27.2

December 19, 2011

13

Tata Global Beverages | Initiating coverage

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 Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Misc. Exp. not written off Total Assets 1,351 629 722 50 2,938 1,391 3,329 1,323 1,012 400 1,358 1,971 16.61 7,088 1,442 707 735 63 3,027 351 4,587 1,089 2,303 267 1,617 2,970 7.64 7,154 1,470 752 718 47 2,929 519 3,998 1,904 653 28 1,560 2,438 6,652 1,563 842 721 39 3,038 587 3,376 997 736 30 1,590 1,786 6,170 1,703 952 750 43 3,038 615 3,620 1,052 802 30 1,914 1,705 6,152 1,856 1,073 783 46 3,038 623 3,757 981 874 30 2,020 1,736 6,227 62 3,353 3,414 1,028 2,609 37 7,088 62 3,591 3,653 1,022 2,431 48 7,154 62 3,662 3,723 1,057 1,797 75 6,652 62 3,895 3,957 1,108 1,042 64 6,170 62 3,976 4,038 1,108 942 64 6,152 62 4,152 4,214 1,108 842 64 6,227 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

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 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 2,088 92 (502) 256 153 557 2,337 (70) 2,818 2,749 203 (1,968) 253 256 (2,274) 1,204 119 1,323 1,256 99 381 154 424 (2,338) (872) (68) 1,155 1,087 (178) 125 154 (457) (234) 1,323 1,089 641 103 42 91 248 (147) 482 (89) 1,472 1,384 (634) 146 91 (871) 815 1,089 1,904 494 99 (143) 44 202 (71) 221 (85) 5 (81) (63) (755) 145 44 (1,007) (907) 1,904 997 558 111 140 65 184 (8) 681 (144) (29) (173) (100) 289 65 (454) 54 997 1,052 694 121 (114) 48 229 12 531 (157) (8) (165) (100) 289 48 (437) (70) 1,052 981

December 19, 2011

14

Tata Global Beverages | Initiating coverage

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) 3.3 45 37 84 1 3.5 49 34 88 4.1 53 31 83 1 3.9 61 33 83 3.9 62 34 83 1 3.9 62 34 83 6.6 57.4 6.0 23.1 6.2 10.4 6.7 5.4 8.0 8.4 9.6 10.2 0.4 0.4 32.9 3.5 54.7 3.6 3.6 15.1 1.8 58.5 6.2 6.2 7.9 2.0 59.6 3.4 3.4 5.0 2.0 63.4 5.4 5.4 7.2 4.0 64.6 6.9 6.9 8.9 4.0 67.4 220.8 2.7 1.6 3.9 1.3 9.8 0.8 25.2 6.0 1.5 2.0 1.4 12.5 0.9 14.5 11.4 1.5 2.2 0.9 9.6 0.7 26.4 17.9 1.4 2.2 0.8 9.8 0.8 16.6 12.5 1.4 4.4 0.7 8.0 0.8 12.2 9.5 1.3 4.7 0.6 6.2 0.7 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

December 19, 2011

15

Tata Global Beverages | Initiating coverage

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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

TGBL 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%)

December 19, 2011

16

Tata Global Beverages | Initiating coverage

6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 39357800 Research Team
Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Shailesh Kanani Srishti Anand Bhavesh Chauhan Sharan Lillaney V Srinivasan Yaresh Kothari Shrinivas Bhutda Sreekanth P.V.S Hemang Thaker Nitin Arora Ankita Somani Varun Varma Sourabh Taparia Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Hiten Sampat Meenakshi Chavan Gaurang Tisani Akshay Shah Production Team: Simran Kaur Dilip Patel Research Editor Production simran.kaur@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Sr. A.V.P- Institution sales Dealer Dealer Dealer mayuresh.joshi@angelbroking.com Hiten.Sampat@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com akshayr.shah@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Infrastructure IT, Telecom Metals, Mining Mid-cap Research Associate (Cement, Power) Research Associate (Automobile) Research Associate (Banking) Research Associate (FMCG, Media) Research Associate (Capital Goods) Research Associate (Infra, Real Estate) Research Associate (IT, Telecom) Research Associate (Banking) Research Associate (Cement, Power) sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com shailesh.kanani@angelbroking.com srishti.anand@angelbroking.com bhaveshu.chauhan@angelbroking.com sharanb.lillaney@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com shrinivas.bhutda@angelbroking.com sreekanth.s@angelbroking.com hemang.thaker@angelbroking.com nitin.arora@angelbroking.com ankita.somani@angelbroking.com varun.varma@angelbroking.com sourabh.taparia@angelbroking.com

CSO & Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093.Tel.: (022) 3083 7700. Angel Broking Ltd: BSE Sebi Regn No: INB010996539 / PMS Regd Code: PM/INP000001546 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / NSE Sebi Regn Nos: Cash: INB231279838 / NSE F&O: INF231279838 / Currency: INE231279838 / MCX Currency Sebi Regn No: INE261279838 / Member ID: 10500 / Angel Commodities Broking Pvt. Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302

December 19, 2011

17