Tata Consumer Products’ revenues decline worry investors

Tata Consumer Products, one of the leading FMCG majors in India, witnessed its share prices tumble nearly 10% in yesterday's trading after reporting lackluster financial results for the second quarter of the current fiscal year.

The company's revenues from operations grew by a modest 13% to Rs.

4,214.

5 crores compared to the same period last year.

However, operating margins declined by 30 basis points to 14.

9% due to rising input costs.

Net profits increased by 6% to Rs.

359 crores year-on-year, but fell short of street expectations.

Weak demand, especially in the urban markets, impacted the volume growth for Tata Consumer during the quarter.

The tea business, which contributes over half of total revenues, registered muted sales.

Rising inflation has also constrained discretionary spending by consumers.

Commenting on the results, analysts at Elara Securities highlighted the competitive pressures in the FMCG sector and slowing demand trends in urban regions as near-term headwinds.

Although they remain optimistic about the company's diverse portfolio and broader growth prospects, earnings estimates for the next two fiscal years have been cut to factor in the pressure on revenues and margins.

While Tata Consumer looks well-positioned in the long run with its brands and distribution expansion plans, investors seem concerned about the soft demand environment squeezing profits in the immediate quarters.

The company will need to efficiently manage costs and urgently revive volume growth in key categories to allay such concerns.

For now, uncertainty over the macroeconomic outlook continues to impact sentiment around fast moving consumer goods players.

.