IGI Logo

Increasing presence in kitchen shelf

TATACONs has acquired 100% equity stake in Capital Foods Pvt. Ltd (owner of ‘Ching’s Secret’ and ‘Smith & Jones’ brands) and Organic India Pvt Ltd (a ‘better for you’ organic brand spanning Food & Beverages and Nutraceutical categories) for a total consideration of INR70b. Key highlights are as follows:

* Capital Foods is the market leader of Desi Chinese products in India with an estimated revenue of ~INR7.5b in FY24 (accounting for ~5% of the incremental revenue in FY24E), while Organic India products span across Food & Beverages and Herbal & Traditional Supplements with an estimated revenue of INR3.6b in FY24 (accounting for ~2.4% of the incremental revenue in FY24E).

* These acquisitions will enable TATACONS to move forward in its journey to emerge as the leading FMCG player with offerings spanning across pantry, liquid, mini meals and sustainable categories. The incremental total addressable market (TAM), India and International, from these new additions will be ~INR1t.

* The acquisition is expected to be EPS accretive for the company from the third year of operations. It has been executed at industry-standard valuations, with Capital Foods/Organic India acquisition valued at ~6.8x/5.2x EV/sales on FY24E sales vs. ~6.4x for TATACONS.

 Scaling up its product basket and brand portfolio

* TATACONS is actively expanding its product portfolio through strategic acquisitions. It acquired Capital Foods Pvt Ltd, renowned for condiments, food products, and ingredients, and marketed under the Ching's Secret and Smith & Jones brands. Additionally, TATACONs has acquired Organic India Pvt Ltd, a company specializing in organic teas and health products. It is backed by Fabindia.TATACONS has acquired 100% stake in Capital Foods for an enterprise value (no cash/no debt) of INR51b in an all-cash deal. The company was valued at 6.8x of its FY24E sales. Of this, 75% of the equity shareholding will be acquired upfront and the remaining 25% will be acquired within the next three years.

* In an another deal, TATACONS has acquired a 100% stake in Organic India at an enterprise value (no cash/no debt) of INR19b. The company was valued at 5.2x of its FY24E sales. Also, there is an additional earnout for the shareholders linked to FY25-26 audited financials of the target company. This acquisition aligns with TATACONS’ strategy to expand the Horizon 3 segment, providing substantial growth opportunities.

* The combined deal value of both the acquisitions stands at INR70b. It will be financed through a combination of available cash reserves, debt, and equity issuance through rights issue or any other mode (subject to Board approval).

*The deal is expected to get competed in 4QFY24, with operational integration set to commence shortly after the closing (to be completed within three to four months). The integration of both the companies with TATACONS is scheduled to take place in FY25.

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412