Abhishek Walia, Assignment 1

Q1. Write the Executive Summary of the Company and its industry.

Company Profile

Tata Global Beverages Limited (formerly Tata Tea Limited) is an Indian

multinational non-alcoholic beverages company headquartered in Kolkata, West
Bengal, India and a subsidiary of the Tata Group. It is the world's second-largest
manufacturer and distributor of tea and a major producer of coffee.

Tata Global Beverages markets tea under the major brands Tata Tea, Tetley,
Good Earth Teas and JEMČA. Tata Tea is the biggest-selling tea brand in India,
Tetley is the biggest-selling tea brand in Canada and the second biggest-selling
in the United Kingdom and the United States and JEMČA is the biggest-selling
tea brand in the Czech Republic.

Tata Global Beverages ventured into the Indian cafe market with a 50/50 joint
venture with Starbucks Coffee Company. The coffee shops branded as "Starbucks
Coffee - A Tata Alliance" will source coffee beans from Tata Coffee, a subsidiary
company of Tata Global Beverages.

Tata Global Beverages focusses on branded natural beverages — tea, coffee and
water. With a long history and experience in the beverages market, and a heritage
of innovation and development, the Company has evolved from a predominantly
domestic Indian tea farming entity to a marketing and brand-focused global
organization.

Tata Global Beverages is the 2nd largest player in branded tea in the world. Tata
Global Beverages ambition is to expand its global footprint by entering new
markets and fresh channels with their brands. They have a strong portfolio of
brands, including Tata Tea, Tetley, Jemča, Vitax, Eight O’Clock Coffee,
Himalayan, Grand Coffee and Joekels. Around 300 million servings of our

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products are consumed every day, bringing many magical beverage moments to
consumers across the world.

Over 60% of our consolidated revenue originates from markets outside India and
more than 90% of our turnover is from branded products. The business has
diversified and expanded significantly over the last decade, with the Company
now employing 3,000 plus people, and having a significant brand presence in 40
countries worldwide.

History

1964 - TATA FINLAY FORMED Tata creates alliance with James Finlay — the
tea giant.

1976 - TATA TAKES OVER the production and marketing of James Finlay.

1983 - TATA TEA IS BORN James Finlay is bought out.

1991 - Tata Tea enters the BUSINESS OF BRANDS.

1993 - Signs joint venture with Allied-Lyons PLC to ESTABLISH TATA

TETLEY.

1996 - Acquires a stake in ESTATE MANAGEMENT SERVICES PVT LTD In

Sri Lanka

2000 - Acquires TETLEY GROUP LIMITED.

2005 - Acquires GOOD EARTH, a famous tea brand in USA.

2006 - Acquires EIGHT O’CLOCK, a popular coffee brand in USA.

2006 - Acquires JEMČA, the leading tea brand in Czech Republic.

2007 - Invests in Mount Everest Mineral Water (MEMW), which owns

HIMALAYAN WATER.

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2007 - Acquires VITAX, the well-known Polish tea brand.

2009 - TATA TEA integrates beverage brands.

2009 - Acquires GRAND, a coffee brand in Russia

2010 - Announces Tata Global Beverages Limited —THE CORPORATE

BRAND. Establishes vision/mission and brand values.

2011 - DEVELOPS NOURISHCO through a joint venture with PepsiCo India.

2011 - Increases stake in JOEKELS TEA. Becomes a subsidiary company.

2012 - Signs joint venture with STARBUCKS.

2012 - EIGHT O’CLOCK COFFEE signs agreement with Green Mountain

Coffee Roasters Inc.

2014 - Acquires MAP COFFEE, Australia’s famous coffee brand.

2016 - The first Indian microlot coffee: Tata Nullore Estate - features in Starbucks
Reserve stores in Seattle, USA

INDUSTRY ANALYSIS

Fast moving consumer goods (FMCG) are the 4th largest sector in the Indian
economy. There are three main segments in the sector – food and beverages which
accounts for 19 per cent of the sector, healthcare which accounts for 31 per cent
and household and personal care which accounts for the remaining 50 per cent.

The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 52.75 billion
in 2017-18. The sector is further expected to grow at a Compound Annual Growth
Rate (CAGR) of 27.86 per cent to reach US$ 103.7 billion by 2020. The sector is
projected to grow 11-12 per cent in 2019. It witnessed growth of 16.5 per cent in

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value terms between June–September 2018; supported by moderate inflation,

increase in private consumption and rural income. It is forecasted to grow at 12-
13 per cent between April– June 2019. FMCG’s urban segment is expected to
have a steady revenue growth at 8 per cent in FY19 and the rural segment is
forecasted to contribute 15-16 per cent of total income in FY19.
Post GST and demonetisation, modern trade share grew to 10 per cent of the
overall FMCG revenue, as of August 2018.

Accounting for a revenue share of around 45 per cent, rural segment is a large
contributor to the overall revenue generated by the FMCG sector in India.
Demand for quality goods and services have been going up in rural areas of India,
on the back of improved distribution channels of manufacturing and FMCG
companies. Urban segment accounted for a revenue share of 55 per cent in the
overall revenues recorded by FMCG sector in India.

FMCG Companies are looking to invest in energy efficient plants to benefit the
society and lower costs in the long term. Tata’s are also planning to expand its
home and personal care products in FMCG sector. Investment intentions, related
to FMCG sector, arising from paper pulp, sugar, fermentation, food processing,
vegetable oils and Vanaspati, soaps, cosmetics and toiletries industries, worth Rs
916.13 billion (US$ 15.55 billion) were implemented between January–
December 20181.

Growing awareness, easier access, and changing lifestyles are the key growth
drivers for the consumer market. The focus on agriculture, MSMEs, education,
healthcare, infrastructure and tax rebate under the Union Budget 2019-20 is
expected to directly impact the FMCG sector. These initiatives are expected to

1
https://www.ibef.org/industry/fmcg.aspx

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increase the disposable income in the hands of the common people, especially in
the rural area, which will be beneficial for the sector.

Q2. Classify the firm as cyclical, growth or stable (based on the nature of its
industry)

The FMCG sector performance has been very crucial and important for the
country’s economic growth. It is the 4th largest sector in Indian economy. The
country has a strong FMCG base and effective government policies to outperform
the industry in terms of growth.

The FMCG sector has performed well over the last decade and is expected to
perform better in the future. The expected growth rate of sector in Indian economy
is 20 percent to 25 percent till 2020. Revenues of FMCG sector reached Rs 3.4
lakh crore (US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7
billion in 2020.

The government has allowed 100 per cent Foreign Direct Investment (FDI) in
food processing and single-brand retail and 51 per cent in multi-brand retail. This
would bolster employment and supply chains, and also provide high visibility for
FMCG brands in organised retail markets, bolstering consumer spending and
encouraging more product launches.

Hence, we can conclude that the sector has shown growth in long term scenario
in the past and will show stable growth in the future also.

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Q3. What were the revenues and earnings per share of the company for the
last five years?

The below table show the Revenue and Earnings per share of Tata Global
Beverages:

Year (in cr.) 2015 2016 2017 2018 2019

Revenue from Operation(in cr.) 8111 6637 6780 6815 7252

Earnings Per share(Rs.) 3.93 -0.09 6.17 7.85 6.47

9000 9

8000 8

7000 7
6
6000
5
5000
4
4000
3
3000
2
2000 1
1000 0
0 -1
2015 2016 2017 2018 2019

Revenue from Operation(in cr.) Earnings Per share(Rs.)

The above chart shows that revenues decrease in 2016 but after that revenues are
increasing yearly and earnings per share also show positive increase after
negative in 2016.

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Q4. What are the annual growth rates in the earnings per share and the
dividend?

The following table shows the annual growth rates in the earnings per share and
the dividend of Tata Global Beverages:

Year 2015 2016 2017 2018 2019

EPS 3.93 -0.09 6.17 7.85 6.47

EPS(Growth Rate %) - -102.3% -6955.6% 27.2% -17.6%

Dividend 2.25 2.25 2.35 2.5 2.5

DPS(Growth Rate %) - 0.0% -4.3% -6.0% 0.0%

The annual growth rate of EPS of Tata Global Beverages suddenly decrease to -
102.3% in 2016 and the suddenly increase by six thousand percent in 2017. In
2019 we can also see from the table that the EPS has been decreased from
previous year.

Whereas the Dividend by the company by almost has been remain same and
wasn’t affected by the variations by the EPS. This shows the company is
following constant dividend yearly.

Q5. What is company’s current payout ratio compared to its historical

payout ratio?

Year 2015 2016 2017 2018 2019

Dividend Payout Ratio 0.572519 -25 0.380875 0.318471 0.386399

Annual Growth Rate of D/E -4466.67% 101.52% -16.38% 21.33%

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The dividend payout ratio has been stable for last three year but has a massive dip
in 2016 due to negative EPS. And hence in 2019 has a positive value of 38.6.

Q6. Comment on the capital structure of the company. Compare the capital
structure of the company with that of five other companies in the industry.

The below table depicts the capital structure distribution for Tata Global
Beverages and along with its 5 competitors:

Tata
Company Name Global HUL Nestle Marico ITC Dabur
Beverages

Total Equity (in cr.) 7332 7659 3673.74 3508 57949 5631.68

Total Debt (in cr.) 2579.35 10206 4414.34 1133 11848 2773.58

Total Liabilities 10938.72 17865 8088.08 4641 69797 8436.64

Equity/ Liabilities 0.67 0.43 0.45 0.76 0.83 0.67

Debt / Liabilities 0.24 0.57 0.55 0.24 0.17 0.33

Debt/Equity 0.35 1.33 1.20 0.32 0.20 0.49

Interest Coverage Ratio 15.64 268.64 22.7 53.67 540.46 31.2

From the above table it can be seen that all companies i.e. Tata Global Beverages,
ITC and Dabur taken into considerations are more interested in financing their
operations via equity finance while they use debt for their finance upto 33 percent.
Whereas HUL and Nestle are more interested in finance their operation via debt
finance as they have more than 50 percent of debt finance.

And for the interest coverage ratio all companies are suitable to pay back interest
on their long-term debt.

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Q7. What are the 5-year high and 5-year low for the company’s debt-equity
ratio? Compare the debt ratio of the selected company with that of five other
companies in the same industry.

The following table shows the debt-equity ratio of Tata Global Beverages for the
period 2015 to 2019 along with its five competitors of the concerned industry:

Total Debt to Total Equity 2015 2016 2017 2018 2019

Tata Global Beverages 0.55 0.46 0.39 0.36 0.35

HUL 2.66 1.22 1.27 1.42 1.33

Nestle 1.05 1.16 1.26 1.15 1.2

Marico 0.71 0.67 0.56 0.6 0.58

ITC 0.44 0.5 0.2 0.21 0.2

Dabur 0.82 0.66 0.59 0.52 0.49

The high Debt-equity ratio for Tata Global beverages is 0.55 for the fiscal year
2015 and after that it is continuously decreasing for the company and lowest value
in 2019 which is 0.35.

Now comparing the Debt-Equity ratio with its competitors it is found that
Hindustan Unilever has highest value of debt-equity ratio mean that it is highly
dependent on short term debt to finance its operation whereas Marico has the
lowest debt-equity ratio imply it has minimum debt to finance its operation.

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Q8. Rank the selected and 5 other companies of the basis of:
(a) Use of Debt Financing

(b) Profitability, and

(c) Valuation based on P/E and Price/Sales ratio

(a) The Following table shows the Debt Financing for Tata Global Beverages
and its five competitors for the fiscal year 2019:

Company Total Debt (amount in cr) % of Debt Financing Rank

Tata Global Beverages 2579.35 0.24 2

HUL 10206 0.57 6

Nestle 4414.34 0.55 5

Marico 113 0.24 3

ITC 11848 0.17 1

Dabur 2773.58 0.33 4

In the above table we consider the following method for ranking:

1 – Least Debt% 6 – Maximum Debt%

Here ITC is ranked first as it uses minimum debt while HUL is ranked sixth as it
uses maximum debt for its financing.

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(b) The following table show the Profitability position using the Profit Margin
ratio for the Tata Global Beverages and its five competitors for the fiscal
year ended 2019:

Company Gross Profit Operating Profit Net Profit Rank

Tata Global Beverages 11.31 10.13 6.53 6

HUL 22.96 22.29 15.79 4

Nestle 22.5 21.5 14.23 5

Marico 20.08 19.87 18.95 2

ITC 39.67 39.58 26.52 1

Dabur 21.83 20.24 16.97 3

In the above table we consider the following method for ranking:

6 – Maximum Profit Margin 1 – Least Profit Margin

Here ITC is ranked first as it has highest Net Profit Margin of 26.52 percent
whereas Tata global Beverages has ranked last in the Net profit Margin. The
reason can be that after a sudden decrease in revenues in 2016 of Tata Global
Beverages, the revenues are increasing at a slow rate for the company. The other
reason is that the company expenditure is high for the year. Therefore Tata Global
should take necessary steps to improve its profit margins in the future.

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(c) The following table shows the valuation of the firm on the basis of P/E
ratio and Price/Sales along with its five competitors for the fiscal year
2019:

Company Price Per Share Earnings Per share PE ratio Rank

Tata Global Beverages 281 6.47 43.4 5

HUL 2009 27.88 72.1 2

Nestle 13708 166.67 82.2 1

Marico 391 8.78 44.5 4

ITC 252.9 10.24 24.7 6

Dabur 447 8.14 54.9 3

Price / Sales
Company Price Per Share Net Sales ( inr Cr.) Rank
ratio
Tata Global
281 7408 0.038 5
Beverages

HUL 2009 39860 0.050 4

Nestle 13708 11551.19 1.187 1

Marico 391 7437 0.053 2

ITC 252.9 50526.47 0.005 6

Dabur 447 8811.16 0.051 3

In the above table we consider the following method for ranking:

1 – Maximum P/E Ratio 6 – Least P/E Ratio

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From the P/E ratio table it can be seen that Nestle is ranked first i.e. it has highest
price-earnings ratio while ITC is ranked last since it has a least price-earnings
ratio.
In the above table we consider the following method for ranking:
1 – Maximum Price/Sales ratio 6 – Least Price/Sales ratio
From the table of price/sales ratio it can be seen that Nestle is ranked 1st i.e. it
has highest price-sales ratio while ITC is ranked last since it has minimum
price-sales ratio.

Q9. Does the company’s P/E ratio suggest that it is under/over value?

The Price Earnings ratio for Tata Global Beverages for the fiscal year 2019 can
be obtained as follows:
Price per Share = INR 281
Earnings per Share = INR 6.47
Price Earnings Ratio = 281/6.47 = 43.4

Now the P/E ratio for the FMCG industry as obtained from the NSE Website for
the said industry (NIFTY FMCG) comes out to be 41.02. This implies that the
stock of Tata Global Beverages is valued same as the industry therefore it’s upto
the investor to decide whether to buy the stock as other companies like HUL and
Nestle has very high PE ratio compared to the market.

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Q10. Construct the DuPont Identity for the company?

According to the DuPont Function the Return on Equity can be calculated by the
following formula:
Return on Equity = Profit Margin*Return on Assets*Equity Multiplier
= Net Profit/Net Sales*Net Sales/Total Assets * Total Assets
/Total Equity

= 473.83/7408.63*7408.63/10938.72*10938.72/7331.69

= 0.0646

Hence the Return on Equity of the company is 6.46%.

Q11. Risk is affected by many factors. How many each of the following affect
the firm specific (unsystematic) risk associated with the company?
(a) The company’s geographical position

(b) Its product line

(c) Its use in debt financing

(d) Foreign competition

(a) The company’s geographical position doesn’t have an impact on the risk
associated with it. The company location doesn’t have any impact on the
sales of its product. It is still to promote and sell its product. Geographical
condition doesn’t have any major impact on the company’s product.

(b) Tata Global Beverages major products line are tea, coffee and water which
are in demand and company deals worldwide for its operations. Tata global

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Beverages is also reacting fast in adopting to the taste of the people in the
country to adopt it and provide required products to the consumers.

(c) With the decrease in the debt financing of the company there is an added
advantage to the company. The fixed expense which is to be paid by them
without any choice in the form of interest has been decreased. The
company is well in position to deal with its interest on taxes and financial
condition.

(d) Foreign competition also leads to an added risk of increased competition

for the Tata global Beverages. To avoid added risk the company has been
in joint venture with many foreign companies in India for example it has a
joint venture with Starbucks’s.

Q12. What is the beta measure of the company?

Daily Change Tata Daily Change S&P

Date Tata Global S&P BSE 500
Global BSE 500
01-10-2018 230.90 14533.55
03-10-2018 227.60 14365.43 -1.43% -1.16%
04-10-2018 218.20 14047.35 -4.13% -2.21%
05-10-2018 209.20 13689.97 -4.12% -2.54%
08-10-2018 215.15 13652.67 2.84% -0.27%
09-10-2018 216.50 13585.36 0.63% -0.49%
10-10-2018 228.40 13882.35 5.50% 2.19%
11-10-2018 224.60 13596.82 -1.66% -2.06%
12-10-2018 229.10 13906.10 2.00% 2.27%
15-10-2018 234.90 13978.45 2.53% 0.52%
16-10-2018 235.45 14111.63 0.23% 0.95%
17-10-2018 231.10 13887.26 -1.85% -1.59%
19-10-2018 227.20 13704.74 -1.69% -1.31%
22-10-2018 223.25 13602.86 -1.74% -0.74%
23-10-2018 218.30 13470.50 -2.22% -0.97%
24-10-2018 219.80 13578.40 0.69% 0.80%
25-10-2018 222.10 13443.57 1.05% -0.99%

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26-10-2018 217.60 13352.53 -2.03% -0.68%

29-10-2018 220.00 13655.89 1.10% 2.27%
30-10-2018 227.30 13647.10 3.32% -0.06%
31-10-2018 217.85 13881.71 -4.16% 1.72%
01-11-2018 217.75 13915.75 -0.05% 0.25%
02-11-2018 217.65 14112.76 -0.05% 1.42%
05-11-2018 219.85 14081.57 1.01% -0.22%
06-11-2018 213.80 14062.78 -2.75% -0.13%
07-11-2018 215.20 14170.33 0.65% 0.76%
09-11-2018 209.50 14185.40 -2.65% 0.11%
12-11-2018 214.70 14042.74 2.48% -1.01%
13-11-2018 219.95 14146.17 2.45% 0.74%
14-11-2018 217.40 14143.55 -1.16% -0.02%
15-11-2018 221.45 14193.11 1.86% 0.35%
16-11-2018 221.80 14249.66 0.16% 0.40%
19-11-2018 224.15 14346.06 1.06% 0.68%
20-11-2018 215.95 14208.30 -3.66% -0.96%
21-11-2018 219.00 14173.59 1.41% -0.24%
22-11-2018 215.90 14079.47 -1.42% -0.66%
26-11-2018 217.65 14178.53 0.81% 0.70%
27-11-2018 217.75 14237.43 0.05% 0.42%
28-11-2018 216.00 14250.62 -0.80% 0.09%
29-11-2018 218.75 14396.33 1.27% 1.02%
30-11-2018 218.65 14429.00 -0.05% 0.23%
03-12-2018 214.75 14469.78 -1.78% 0.28%
04-12-2018 209.50 14454.31 -2.44% -0.11%
05-12-2018 211.70 14315.92 1.05% -0.96%
06-12-2018 208.15 14080.71 -1.68% -1.64%
07-12-2018 206.55 14170.58 -0.77% 0.64%
10-12-2018 198.20 13904.18 -4.04% -1.88%
11-12-2018 202.85 14033.22 2.35% 0.93%
12-12-2018 212.95 14306.94 4.98% 1.95%
13-12-2018 212.40 14390.84 -0.26% 0.59%
14-12-2018 212.35 14412.03 -0.02% 0.15%
17-12-2018 210.05 14515.94 -1.08% 0.72%
18-12-2018 210.10 14553.10 0.02% 0.26%
19-12-2018 210.15 14661.08 0.02% 0.74%
20-12-2018 210.20 14642.72 0.02% -0.13%
21-12-2018 215.40 14401.20 2.47% -1.65%
24-12-2018 219.05 14279.65 1.69% -0.84%
26-12-2018 218.55 14334.40 -0.23% 0.38%
27-12-2018 220.05 14390.12 0.69% 0.39%
28-12-2018 220.80 14516.04 0.34% 0.88%
31-12-2018 219.40 14540.39 -0.63% 0.17%
02-01-2019 214.60 14432.40 -2.19% -0.74%

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03-01-2019 210.05 14290.85 -2.12% -0.98%

04-01-2019 213.80 14355.02 1.79% 0.45%
07-01-2019 214.95 14389.35 0.54% 0.24%
08-01-2019 215.15 14425.57 0.09% 0.25%
09-01-2019 212.60 14470.17 -1.19% 0.31%
10-01-2019 214.15 14459.85 0.73% -0.07%
11-01-2019 211.90 14422.98 -1.05% -0.25%
14-01-2019 213.50 14350.37 0.76% -0.50%
15-01-2019 214.30 14514.43 0.37% 1.14%
16-01-2019 216.45 14520.13 1.00% 0.04%
17-01-2019 218.15 14524.79 0.79% 0.03%
18-01-2019 216.25 14488.81 -0.87% -0.25%
21-01-2019 210.50 14506.57 -2.66% 0.12%
22-01-2019 212.10 14470.55 0.76% -0.25%
23-01-2019 210.60 14379.84 -0.71% -0.63%
24-01-2019 210.80 14383.46 0.09% 0.03%
25-01-2019 207.05 14260.83 -1.78% -0.85%
28-01-2019 209.25 14075.91 1.06% -1.30%
29-01-2019 204.85 14075.71 -2.10% 0.00%
30-01-2019 204.50 14083.19 -0.17% 0.05%
31-01-2019 203.80 14285.11 -0.34% 1.43%
01-02-2019 204.10 14361.85 0.15% 0.54%
04-02-2019 199.85 14338.05 -2.08% -0.17%
05-02-2019 185.95 14322.26 -6.96% -0.11%
06-02-2019 188.45 14450.95 1.34% 0.90%
07-02-2019 191.10 14500.24 1.41% 0.34%
08-02-2019 185.70 14323.79 -2.83% -1.22%
11-02-2019 179.75 14214.75 -3.20% -0.76%
12-02-2019 186.55 14148.34 3.78% -0.47%
14-02-2019 188.90 14064.80 1.26% -0.59%
15-02-2019 186.15 13994.20 -1.46% -0.50%
18-02-2019 182.75 13874.99 -1.83% -0.85%
19-02-2019 184.50 13858.93 0.96% -0.12%
20-02-2019 188.70 14019.13 2.28% 1.16%
21-02-2019 190.65 14105.87 1.03% 0.62%
22-02-2019 189.25 14136.76 -0.73% 0.22%
25-02-2019 191.10 14245.60 0.98% 0.77%
26-02-2019 191.65 14186.18 0.29% -0.42%
27-02-2019 192.70 14173.30 0.55% -0.09%
28-02-2019 193.70 14196.80 0.52% 0.17%
01-03-2019 197.30 14319.03 1.86% 0.86%
05-03-2019 197.55 14532.99 0.13% 1.49%
06-03-2019 197.95 14618.31 0.20% 0.59%
07-03-2019 196.60 14612.15 -0.68% -0.04%
08-03-2019 193.20 14591.91 -1.73% -0.14%

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11-03-2019 202.50 14797.78 4.81% 1.41%

12-03-2019 204.90 14949.37 1.19% 1.02%
13-03-2019 202.85 14973.72 -1.00% 0.16%
14-03-2019 206.20 14970.59 1.65% -0.02%
15-03-2019 203.20 15045.28 -1.45% 0.50%
18-03-2019 200.25 15069.49 -1.45% 0.16%
19-03-2019 203.30 15160.68 1.52% 0.61%
20-03-2019 198.10 15136.60 -2.56% -0.16%
22-03-2019 195.75 15051.35 -1.19% -0.56%
25-03-2019 196.65 14916.85 0.46% -0.89%
26-03-2019 196.05 15066.84 -0.31% 1.01%
27-03-2019 196.60 15057.53 0.28% -0.06%
28-03-2019 198.95 15215.86 1.20% 1.05%
01-04-2019 208.10 15373.98 4.60% 1.04%
02-04-2019 211.90 15399.72 1.83% 0.17%
03-04-2019 208.35 15312.73 -1.68% -0.56%
04-04-2019 211.35 15260.89 1.44% -0.34%
05-04-2019 211.30 15347.23 -0.02% 0.57%
08-04-2019 211.70 15268.15 0.19% -0.52%
09-04-2019 210.25 15337.23 -0.68% 0.45%
10-04-2019 208.80 15245.47 -0.69% -0.60%
11-04-2019 214.60 15261.38 2.78% 0.10%
12-04-2019 215.15 15324.53 0.26% 0.41%
15-04-2019 216.65 15388.87 0.70% 0.42%
16-04-2019 215.70 15501.39 -0.44% 0.73%
18-04-2019 208.85 15421.87 -3.18% -0.51%
22-04-2019 209.35 15207.33 0.24% -1.39%
23-04-2019 209.60 15188.00 0.12% -0.13%
24-04-2019 208.90 15348.12 -0.33% 1.05%
25-04-2019 211.20 15258.15 1.10% -0.59%
26-04-2019 213.20 15338.58 0.95% 0.53%
30-04-2019 209.20 15293.75 -1.88% -0.29%
02-05-2019 206.30 15252.01 -1.39% -0.27%
03-05-2019 204.00 15231.50 -1.11% -0.13%
06-05-2019 202.65 15087.28 -0.66% -0.95%
07-05-2019 199.75 14958.09 -1.43% -0.86%
08-05-2019 199.45 14780.67 -0.15% -1.19%
09-05-2019 198.60 14716.32 -0.43% -0.44%
10-05-2019 198.50 14699.29 -0.05% -0.12%
13-05-2019 199.85 14495.61 0.68% -1.39%
14-05-2019 200.25 14578.47 0.20% 0.57%
15-05-2019 199.25 14497.75 -0.50% -0.55%
16-05-2019 220.80 14596.24 10.82% 0.68%
17-05-2019 235.40 14767.17 6.61% 1.17%
20-05-2019 235.85 15304.65 0.19% 3.64%

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 Abhishek Walia, Assignment 1

21-05-2019 232.50 15156.71 -1.42% -0.97%

22-05-2019 234.05 15193.67 0.67% 0.24%
23-05-2019 230.30 15123.20 -1.60% -0.46%
24-05-2019 234.90 15392.19 2.00% 1.78%
27-05-2019 233.40 15523.60 -0.64% 0.85%
28-05-2019 237.30 15551.66 1.67% 0.18%
29-05-2019 234.35 15447.89 -1.24% -0.67%
30-05-2019 236.85 15543.65 1.07% 0.62%
31-05-2019 244.00 15517.90 3.02% -0.17%
03-06-2019 244.95 15705.30 0.39% 1.21%
04-06-2019 253.45 15636.00 3.47% -0.44%
06-06-2019 252.50 15395.54 -0.37% -1.54%
07-06-2019 257.00 15413.04 1.78% 0.11%
10-06-2019 252.70 15458.40 -1.67% 0.29%
11-06-2019 255.35 15524.17 1.05% 0.43%
12-06-2019 255.15 15436.56 -0.08% -0.56%
13-06-2019 253.85 15426.80 -0.51% -0.06%
14-06-2019 247.05 15304.57 -2.68% -0.79%
17-06-2019 245.70 15106.50 -0.55% -1.29%
18-06-2019 247.80 15128.25 0.85% 0.14%
19-06-2019 245.30 15089.68 -1.01% -0.25%
20-06-2019 255.85 15277.09 4.30% 1.24%
21-06-2019 261.80 15172.48 2.33% -0.68%
24-06-2019 259.95 15144.88 -0.71% -0.18%
25-06-2019 259.15 15253.60 -0.31% 0.72%
26-06-2019 272.65 15332.21 5.21% 0.52%
27-06-2019 273.80 15350.45 0.42% 0.12%
28-06-2019 269.70 15291.70 -1.50% -0.38%
01-07-2019 271.55 15380.24 0.69% 0.58%
02-07-2019 271.80 15429.64 0.09% 0.32%
03-07-2019 271.65 15450.21 -0.06% 0.13%
04-07-2019 269.65 15479.27 -0.74% 0.19%
05-07-2019 266.60 15291.98 -1.13% -1.21%
08-07-2019 263.55 14960.48 -1.14% -2.17%
09-07-2019 263.55 14970.24 0.00% 0.07%
10-07-2019 251.65 14881.72 -4.52% -0.59%
11-07-2019 255.95 14985.77 1.71% 0.70%
12-07-2019 257.95 14971.95 0.78% -0.09%
15-07-2019 254.30 14991.05 -1.42% 0.13%
16-07-2019 259.55 15091.12 2.06% 0.67%
17-07-2019 257.00 15111.61 -0.98% 0.14%
18-07-2019 255.10 14970.66 -0.74% -0.93%
19-07-2019 248.85 14736.48 -2.45% -1.56%
22-07-2019 251.60 14641.86 1.11% -0.64%
23-07-2019 250.40 14617.72 -0.48% -0.16%

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24-07-2019 249.90 14502.25 -0.20% -0.79%

25-07-2019 251.60 14503.37 0.68% 0.01%
26-07-2019 258.35 14553.92 2.68% 0.35%
29-07-2019 256.00 14424.07 -0.91% -0.89%
30-07-2019 249.70 14260.40 -2.46% -1.13%
31-07-2019 251.60 14324.12 0.76% 0.45%
01-08-2019 258.75 14152.74 2.84% -1.20%
02-08-2019 265.60 14165.40 2.65% 0.09%
05-08-2019 260.90 13993.11 -1.77% -1.22%
06-08-2019 270.55 14128.20 3.70% 0.97%
07-08-2019 269.40 14028.89 -0.43% -0.70%
08-08-2019 270.90 14230.48 0.56% 1.44%
09-08-2019 265.50 14334.42 -1.99% 0.73%
13-08-2019 263.60 14083.35 -0.72% -1.75%
14-08-2019 267.00 14211.79 1.29% 0.91%
16-08-2019 266.85 14235.18 -0.06% 0.16%
19-08-2019 268.20 14252.70 0.51% 0.12%
20-08-2019 265.90 14193.91 -0.86% -0.41%
21-08-2019 261.45 14052.31 -1.67% -1.00%
22-08-2019 258.70 13821.18 -1.05% -1.64%
23-08-2019 265.95 13932.86 2.80% 0.81%
26-08-2019 269.05 14209.07 1.17% 1.98%
27-08-2019 266.40 14302.54 -0.98% 0.66%
28-08-2019 280.05 14219.71 5.12% -0.58%
29-08-2019 274.55 14122.10 -1.96% -0.69%
30-08-2019 278.50 14234.07 1.44% 0.79%
03-09-2019 271.20 13955.84 -2.62% -1.95%
04-09-2019 267.00 14002.77 -1.55% 0.34%
05-09-2019 264.45 14022.67 -0.96% 0.14%
06-09-2019 262.75 14137.04 -0.64% 0.82%
09-09-2019 263.80 14220.34 0.40% 0.59%
11-09-2019 259.35 14288.49 -1.69% 0.48%
12-09-2019 262.30 14240.32 1.14% -0.34%
13-09-2019 259.00 14351.45 -1.26% 0.78%
16-09-2019 257.50 14283.54 -0.58% -0.47%
17-09-2019 256.25 14038.13 -0.49% -1.72%
18-09-2019 259.75 14078.06 1.37% 0.28%
19-09-2019 254.45 13900.71 -2.04% -1.26%
20-09-2019 267.35 14643.08 5.07% 5.34%
23-09-2019 273.65 15044.91 2.36% 2.74%
24-09-2019 275.00 15024.64 0.49% -0.13%
25-09-2019 279.45 14819.33 1.62% -1.37%
26-09-2019 279.90 14981.24 0.16% 1.09%
27-09-2019 281.95 14899.79 0.73% -0.54%

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 Abhishek Walia, Assignment 1

In the above table we calculate the return for each subsequent period for both the
Index and the stock to obtain the return for each period and hence use the data
obtained in the process to calculate the risk measure of the stock using the SLOPE
function in excel. On applying this function we are able to calculate the Beta for
Tata Global Beverages as 0.8959. This also leads to the conclusion that the stock
is less volatile than the market.

Q13. Calculate the weighted average cost of capital (WACC) of the company.

The Weighted Average Cost of Capital for Tata Global Beverages can be
calculated in the following manner:

Interest Expense, i = INR 52.57

Dividends Paid, d1 = INR 178.68
Tax Rate, T = 34.94%
Total Debt, D = INR 1116.9
Total Equity, E = INR 7332
Market Rate (Nifty Return) = 13.89% CAGR
Risk Free Rate (T-Bill 365 Days) = 7.8%
Beta = 0.89
Cost of Debt, Rd = Interest/Total Debt = 52.57/1116.9 = .0469 = 4.69%
Cost of Equity, Re = Risk Free Rate + Beta*(market Return – Risk Free Rate)
= 7.8 + .89*(13.89 – 7.8)
= 13.22%
WACC = Rd (D/D+E) + Re (E/D+E)*(1-T)
= .0469*(1 - 0.3494)(1116.9/8448.9) + .1322*(7332/8448.9)
= .4% + 11.47% = 11.87%

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 Abhishek Walia, Assignment 1

This is the minimum required rate of return for the company below which any
project should not be accepted or investment must not be made.

Q14. Suppose you had bought the share of the chosen company five years
back. Calculate the holding period return.

The Holding Period Return for Tata Global Beverages can be calculated in the
following manner:
Time Period, n = 5 years
Total Dividends = 2.25+2.25+2.35+2.5+2.5 = INR 11.85
Opening Stock Price, March, 2014 = INR 136.00
Closing Stock Price, March, 2019 = INR 201.74
Holding Period Return = ((Dividend + Closing Price)/Opening Price
= (11.85 + 201.74 )/136
= 1.570

Holding Period Yield = 0.57

Annual Holding Period Yield = 1.57^.2 – 1 = 0.0945 = 9.45%

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 Abhishek Walia, Assignment 1

Q15. Suppose, you had bought a portfolio of identified companies from the
chosen industry, would then your returns be more/less than investing in a
single company?

To evaluate whether to make an investment in a single company or a portfolio of

companies we must first calculate the Holding Period Return all the competitors
and hence use these returns to reach a conclusion:
Holding Period Return for the Competitors:

Tata
Company Name Global HUL Nestle Marico ITC Dabur
Beverages

Total Dividends 11.85 90 375.5 19.25 30.4 16.75

Opening Stock Price 136 551.2 4694.83 95.38 205.4 171.5

Closing Stock Price 201.74 1694.55 10865.87 321.67 291.66 405.97

Holding Period Return 1.57 3.24 2.39 3.57 1.57 2.46

Holding Period Yield 57.05% 223.76% 139.44% 257.43% 56.80% 146.48%

Annual HPY 9.45% 26.49% 19.08% 29.01% 9.41% 19.77%

Assuming a portfolio containing of the companies where equal weights are

assigned to each stock. This portfolio will give us the following return:

Annual HPY port = (9.45 + 26.49 + 19.08 + 29.01 + 9.41 + 19.77) / 6

= 18.86 %

This clearly proves that the portfolio would give us a significantly higher return
than the single asset over the defined time period even if we are considering an
equal weight for each of the stocks.

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 Abhishek Walia, Assignment 1

REFERENCES

1. Tata Global Beverages (n.d) Retrieved September 22, 2019, From

https://www.moneycontrol.com/financials/tataglobalbeverage/balance-
sheetVI/TT#TT
2. Tata Global Beverages (n.d) Retrieved September 22, 2019, From
https://www.moneycontrol.com/financials/tataglobalbeverage/profit-
loss/TT#TT
3. In, B. O. (n.d.). 15LS.L Historical Prices | NSEI/Tata Global Beverages
Stock - Yahoo Finance. Retrieved September 22, 2019 from
https://in.finance.yahoo.com/quote/TATAGLOBAL.NS/history?p=TATAG
LOBAL.NS
4. In, B. O. (n.d.). 15LS.L Historical Prices | NSEI/S&P BSE 500 Index -
Yahoo Finance. Retrieved September 22, 2019 from
https://in.finance.yahoo.com/quote/BSE-500.BO/history?p=BSE-500.BO
5. Indian FMCG Industry retrieved data from
https://www.ibef.org/industry/fmcg.aspx
6. Tata Global Beverages (2019), annual report. Retrieved From
http://tataglobalbeverages.com/investors/investor-information/annual-
reports

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