Tata Consumer Products plans a rights issue of Rs 3,500 cr for acquisitions
Sunil D. Souza, MD and CEO, Tata Consumer Products
Tata Consumer Products Ltd (TCPL) is set to announce a rights issue of Rs 3,500 crore to finance its acquisitions of Capital Foods and Organic India, valued at Rs 7,000 crore, according to a report by The Economic Times (ET). TCPL aims to diversify into high-margin and value-added food segments, besides raw materials, through these acquisitions announced last week.
The rights issue follows the company’s recent deals with Capital Foods, known for brands such as Ching’s Secret and Smith & Jones, and Fab India-backed Organic India, which offers access to the pharmaceutical distribution channel.
The acquisition of Capital Foods was announced last week. Ching’s Secret and Smith & Jones have an enterprise value of Rs 5,100 crore, and Organic India has an enterprise value of Rs 1,900 crore. The Tata Group’s FMCG arm is expected to fund half of these deals through internal revenue.
Capital Foods and Organic India will offer growth opportunities with gross margins between 50 and 55 percent. The acquisitions also align with TCPL’s platform strategy to build its core tea into a premium business, strengthen its pantry platform and expand into snacks, mini meals and future growth supplements.
TCPL will leverage its distribution breadth of 3.9 million outlets to expand the reach of Capital Foods and Organic India products. The company has placed emphasis on maintaining the authenticity of Organic India’s organic products and taking advantage of Tata’s extensive testing protocols. The acquisitions will also help Tata Consumer build its health and wellness platform.
As previously reported by Business Standard, MD and CEO Sunil D’Souza has expressed the company’s aim to become a major FMCG company. According to D’Souza, they are still at the very beginning and any ‘gaps’ in the portfolio are ‘a choice and not standard’. He added that they are in no rush to expand their portfolio and want to build up food and beverage first.
First print: January 15, 2024 | 10:34 am IST