Tata Global Beverages Ltd. (TGBL), Starbucks Corp. (SBUX)’s Indian partner, declined the most in more than eight months in Mumbai trading after Morgan Stanley downgraded its recommendation on the stock.
The company’s shares fell 5.3 percent to 164.15 rupees at the close in Mumbai, the most since Feb. 27. The stock has climbed 82 percent this year, compared with the 19 percent gain in the benchmark Sensitive Index.
The rating on the stock was cut to underweight, the equivalent of a sell, from equalweight at Morgan Stanley on concern there will be limited gains from its venture with Starbucks and Tata Global suffers from poor earnings “visibility,” a lack of pricing power and slow pace of revenue growth, Morgan Stanley analysts Nillai Shah, Girish Achhipalia and Sanath Sudarsan wrote in a note to investors today.
“To that extent the recent stock move seems exaggerated,” Shah, Achhipalia and Sudarsan said. “Save for cyclical improvement in the international coffee business, we fail to see any structural change in growth, profitability, market construct or return ratios for the company.”
Tata Global got about 70 percent of its revenue, including that of units, from outside India in the year ended March 31, according to data compiled by Bloomberg. Tea accounted for 72 percent of its total sales, while coffee contributed 27 percent, the data shows.
Starbucks announced an equal joint venture with Tata Global earlier this year and opened its first store in the country in Mumbai last month.
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