Tata Global is a very strong stock: Nikunj Dalmia

ET Now’s Nikunj Dalmia shares his views on Tata Global. Excerpts:

Nikunj Dalmia: Tata Global is a trending and a very strong stock. The markets were all over the place in September, but Tata Global Beverages was firm like a rock and it never went below Rs 140.

There is some technical activity—momentum is on the upside and delivery based volumes also are looking encouraging.

However, the buzz is that there are two important dynamics which you need to monitor: Value addition. Tata Global Beverages is in the middle of a big expansion. They are launching key products both locally and globally. Tetley is going global and the local business is expanding.

However, the surprise factor for Tata Global Beverages could come from their Starbucks joint venture or the Starbucks franchise. Five months into operation, Starbucks has made a profit of about Rs 1.4 crore. This means that per store, they are averaging about Rs 1.5 crore, which is about four times more than the nearest rival Cafe Coffee Day and about 50 per cent more than Costa Coffee.

Starbucks is planning to launch about 100 to 115 stores in the next 12 months. This means Starbucks joint venture will easily add about Rs 15 to 20 crore to the bottom line of Tata Global Beverages for FY'14 and maybe about 20 per cent more for FY'15.

The management of Starbucks has gone on record and they have indicated that they want India to be one of their top markets when it comes to the global Starbucks business. Hence, the opportunity is huge. The franchise has surprised everyone. At best for FY'14, markets are betting on a profit of about seven to eight crores from the Starbucks joint venture. Therefore, this stock could be in for some earnings upgrade due to value addition and due to the success of the Starbucks franchise.