Tata Consumer Products Valuation Excel Model- Billion Dollar Valuation

Reading Time: 4 minutes


Source link | LinkedIn Profile | Twitter Profile

Tata Consumer Products Valuation : About the Company

TATA Consumer Products was formed when Tata Chemicals de-merged it’s Consumer Products Business (CPB) as a going concern into Tata Global Beverages in an-all equity transaction in February 2020. The overall aim of the transaction was to create a sizeable Consumer player in the Indian market with enhanced scale and financial strength. The company currently manufactures Tea, Coffee, Liquid beverages, Salt, Spices and Staples and operates a joint venture with Starbucks in India. Some of their major brands include Tata Tea, Tetley, Himalayan Water, Tata Salt and Tata Sampann. From here, we go ahead with Tata Consumer Products Valuation and Intrinsic Value of its shares.

Read more here: Tata Consumer Products Shares Fundamental Analysis 

Methodology Used:

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The following step by step procedure is followed.

  1. Determining the Revenue Growth Rates
  2. Forecasting the Financial Statements
  3. Deriving the FCFF and FCFE
  4. Calculating the Terminal Value
  5. Calculating the Discount Rate
  6. Discounting the Cashflows
  7. Arriving at the Intrinsic Value of the Shares
Also Read on FinMedium:  Aarti Industries Ltd Share Analysis

You can get the complete excel model used for this analysis from below:



Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the company and the economy. This along with adjustments to changes in the management expectations, extraordinary events and other macro factors give the revenue growth rates for Tata Consumer Products Valuation.

Financial Year Revenue Growth Rate
Year 1 33%
Year 2 16%
Year 3 9%
Year 4 10%
Year 5 12%
Revenue Growth Rates: Tata Consumer Products Valuation

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of the company. The assumptions used for forecasting are tabulated below. The Excel model is completely editable and can be adjusted for specific changes which may happen over a period of time.

Financial Statements Forecast : Tata Consumer Products Valuation
Financial Statements Forecast : Tata Consumer Products Valuation



Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after accounting for depreciation expenses, taxes, working capital, and investments. FCFF is a measurement of a company’s profitability after all expenses and reinvestments. It is given as follows.

Also Read on FinMedium:  Is MindTree Worth Investing?

Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a measure of equity capital usage.

F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 12184 8661 11176 11117 14045
Free Cash Flow to Equity 20215 14752 12731 12973 17927
FCFF and FCFE values: Tata Consumer Products Valuation

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when future cash flows can be estimated. It assumes that a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

Terminal Value Calculation Units INR Millions
Free Cash Flow to Firm 14044.62
Growth Rate 6.00%
Cost of Capital 13.24%
Terminal Value 205625.22
Terminal Value: Tata Consumer Products Valuation

Step 5: Calculating the Discount Rate

DCF analysis helps assess the viability of a project or investment by calculating the present value of expected future cash flows using a discount rate. Here we use the Weighted average cost of capital (WACC) to discount the cash flow. The below table from the excel model shows the calculation of WACC for Tata Consumer Products Valuation.

WACC Calculation for Tata Consumer Products Valuation.
WACC Calculation for Tata Consumer Products Valuation.



Step 6: Discounting the Cashflows

The WACC and the Cost of Equity for the company calculated in the above step are then used to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value of future FCFF for Tata Consumer Products Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for Tata Consumer Products Valuation.
PV of FCFF and FCFE for Tata Consumer Products Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFF and Terminal Value (the Value of the entire firm) by the number of outstanding shares we get the per share intrinsic value. We can compare this price with the current market price of the stock to get the Discount or Premium to its intrinsic price.

Also Read on FinMedium:  Introduction to Scientific Investing Program – Factsbeyondnumbers
Tata Consumer Products Valuation Units
PV in INR Million 149941
No of Shares Outstanding (In Million) 631
Intrinsic Value 237.62
Current Market Price of Share 618
Current Discount/Premium 159%
Intrinsic Value of the Shares: Tata Consumer Products Valuation

Tata Consumer Products Valuation and Intrinsic Share Price = INR 237.62

Subscribe to our new Youtube Channel!
Subscribe via Email for our daily analysis on 200+ stocks!
Join our Telegram Channel.



Download the Excel Model from Here!

References: Investopedia
Our 150+ Stock Valuations
Our Stock ratings List
You can read more about the company on its website!
Investor Presentation.
For fundamental analysis of other listed companies click HERE!

(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)



Source link | LinkedIn Profile | Twitter Profile

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!


Billion Dollar Valuation

Billion Dollar Valuation

Billion Dollar Valuation shares thorough research into the Fundamentals of the businesses listed in India. With their insightful write-ups, they uncover a lot on the table.
Please Share :)