Tata Consumer to acquire Capital Foods and Organic India

Capital Foods primarily engaged in the business of manufacture and sale of packaged food and condiments and primarily manufactures and sells chutney, masala, sauces, noodles and soups under the trademark 'Ching?s Secret' and 'Smith & Jones'. Its estimated turnover for FY23-24 is approximately Rs 750-770 crore.

Capital Foods enterprise value on 'no cash/no debt basis' for 100% of the target company is Rs 5,100 crore. 75% of the equity shareholding will be acquired upfront and the balance 25% shareholding will be acquired within the next three years.

This acquisition will enable Tata Consumer Products to expand its product portfolio and further strengthen its pantry platform. There are significant synergy benefits with the existing businesses of Tata Consumer Products in areas spanning distribution, logistics, exports and overheads.

Sunil D?Souza, MD & CEO, Tata Consumer Products said, We are excited to welcome Capital Foods into Tata Consumer Products. We believe this is a good strategic and financial fit. It will open up significant market opportunities in the fast-growing non-Indian cuisines segment, leveraging the sales and distribution platform that we have built.

The strong brand recall of Ching?s Secret and Smith & Jones coupled with our operational strength across channels makes us extremely confident of driving topline growth and realizing cost synergies. This transaction will accelerate momentum in our business and is margin accretive to our business.?

Further, the FMCG company has also signed definitive agreements with Fabindia to acquire up to 100% of the issued equity share capital of Organic India, an organic brand spanning food & beverages and herbal & traditional supplements and package foods. Its estimated turnover for FY23-24 is approximately Rs 360 to 370 crore.

Organic India enterprise value on ?no cash/no debt basis? for 100% of the target company is Rs 1,900 crore along with an additional earnout for the shareholders linked to FY2025-26 audited financials of the target company.

The acquisition is in line with the company's strategic intent of entering into new adjacent high growth/ attractive margin categories in the food and beverage space. The acquisition will enable creation of health and wellness platform.

Subject to fulfilment of terms and conditions as per the SPA, the acquisition of up to 100% equity shareholding is expected to be completed within 3 months.

Sunil D?Souza, MD & CEO, Tata Consumer Products said, ?We are excited about bringing Organic India into Tata Consumer Products. This transaction aligns well with Tata Consumer?s overall strategic objectives and presents exciting market opportunities in the rapidly growing Health & Wellness segment.

In addition, Organic India has built very strong relationships with farmers to create a robust organic supply chain with a trusted brand and a loyal consumer base. Organic India?s differentiated products and robust supply chain together with Tata Consumer?s distribution strength across channels in India and specific geographies globally makes us confident of accelerating momentum in the business while improving our margin profile.?

Tata Consumer Products is a focused consumer products company uniting the principal food and beverage interests of the Tata Group under one umbrella. The company's portfolio of products includes tea, coffee, water, RTD, salt, pulses, spices, ready-to-cook and ready-to-eat offerings, breakfast cereals, snacks and mini meals.

The company has recorded 1% rise in consolidated net profit to Rs 359 crore on a 11% increase in revenue from operations to Rs 3,734 crore in Q2 FY24 as compared with Q2 FY23.

The scrip rallied 3.48% to settle at Rs 1158.70 on Friday, 12 January 2024 on the BSE.

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