Tata Consumer Products Ltd (TCPL) on Friday announced acquisitions of Capital Foods, which owns the popular Ching's Secret brand, and Fab India-backed Organic India for a combined enterprise value of Rs 7,000 crore.
The latest buyouts will bolster the Tata Group company in the fast growing and highly competitive market.
The Tata Group arm TCPL will acquire 100 per cent equity shares of Capital Foods, which owns brands like Ching’s Secret and Smith & Jones, at an enterprise valuation of Rs 5,100 crore.
TCPL will also acquire Organic India, which operates in the health and wellness category, at an enterprise value of Rs 1,900 crore.
The move will help TCPL, which is transforming itself into a full-fledged fast-moving consumer goods company (FMCG), to expand its portfolio into the packed food segment.
TCPL has entered into a Share Purchase Agreement and Shareholders’ Agreement with the existing promoters and shareholders of Capital Foods for the acquisition of 75 per cent equity shareholding of the company from its various shareholders, in an all-cash deal.
The balance 25 per cent will be acquired within 3 years, it said.
"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," said TCPL.
Fab India-owned Organic Food is in the business of manufacturing and sale of organic products, including tea, infusions, herbal supplements and packaged foods.
"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 the creation of a health and wellness platform," it said.
This is also an all-cash deal and is expected to be completed within three months, said TCPL.
In Capital Foods also, TCPL expects the acquisition of 75 per cent of equity shareholding to be completed before March 31, 2024.
Capital Food's revenue for the financial year ended March 31, 2023, was 705.5 crore and Organic India's revenue was Rs 324.4 crore.
The total addressable market for the categories that Organic India is present in is Rs 7,000 crore in India and Rs 75,000 crore in international markets, where Tata Consumer has a strong presence.
"This acquisition will provide significant synergy benefits in distribution, logistics and overheads apart from driving portfolio premiumisation and unlocking additional channels and new markets," it said.
Capital Foods acquisition will enable TCPL 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," it said.
The overall size of the categories in which Capital Foods operates is estimated at Rs 21,400 crore.
Commenting over the development, TCPL MD and CEO Sunil D’Souza said this transaction will accelerate momentum in our business and is margin accretive to our business.
"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 realising cost synergies," he said.
Capital Foods founder Ajay Gupta said: ”Together, Tata and Capital Foods can create a multinational culinary brand that includes multiple food categories".
TCPL - which owns iconic brands such as Tata Tea, Tetley and Tata Salt - had a revenue in FY23 of Rs 13,783 crore.
In 2011, TCPL acquired Bengaluru-based Kottaram Agro Foods for Rs 155.8 crore to expand its product portfolio.