Tata Consumer Products to enter Nifty 50 from March 31st!

Tata Consumer Products will be included in the Nifty 50 Index from March 31st, 2021. 

Free-float and weightage

• Tata Consumer Products currently has a free-float market capitalisation of ~Rs 37,071 crore, which is similar to Eicher Motors that has a weight of 0.53% in Nifty 50 (based on yesterday’s free-float mcap). Therefore, it is expected that Tata Consumer will have approximately 0.53% weightage in the Index.
• According to estimates by ICICI Securities, the stock should see buying by ETFs and index funds worth Rs 760 crore.
• GAIL, which has a weightage of 0.44% will be excluded from the index. 

Impact on valuation of Nifty 50

Tata Consumer has a higher PE ratio (standalone ratio of ~94 times), as compared to GAIL (~11.94 times). Hence, it is expected that the Nifty’s valuation will also become pricier. However, since the weightage is expected to be low (0.53%), the impact is expected to be minimal. 

Tata Consumer’s Q3 Performance

• Tata Consumer has reported a 23% on-year rise in revenue, led by broad based growth in both the India and International branded businesses. The net profit rose 29% on-year. 
• The company has also announced plans to buy 100% of the total equity in ready-to-eat food products maker Kottaram Agro Foods — the promoter of the ‘Soulful’ brand — for Rs 155.8 crore.

The company said that it is exploring various growth avenues through new launches across markets. It has also stepped up investment behind its brands to further strengthen its reach and relevance to consumers. Overall, despite a challenging external environment this year due to rise in input costs, the company has delivered good growth, improving visibility for the upcoming quarters.