Rs 7,000 Crore Deal By Ratan Tata's FMCG; An Organic, Ching's Buyout Win-Win For Tata Consumer Products

Ratan Tata-backed FMCG player, Tata Consumer Products has agreed to 100% acquisition of two popular brands namely Organic India, and trademark 'Ching's Secret' and 'Smith & Jones' owner Capital Foods. The transaction of two acquisitions is together for a consideration of Rs 7,000 crore. The move is not only going to let Tata Consumer drive its foods and beverages business but even farmers and customers will benefit eventually.

Of the total Rs 7,000 crore, Tata Consumer will pay Rs 5,100 crore for Capital Foods, and Rs 1,900 crore for Organic India. On BSE, Tata Consumer shares touched a new 52-week high of Rs 1,165 apiece last on Friday, before ending the market hours at Rs 1,158.70 apiece up by 3.5%.

Tata Consumer has a market value of Rs 1,07,644.58 crore.

Capital Foods Buyout:

Capital Foods is an Indian company 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'.

These renowned brands will come under the ambit of Tata Consumer upon completion of the deal.

Tata Consumer in the first phase will acquire 75% equity shareholding of Capital Foods from its various shareholders, and the rest of 25% will be acquired within 3 years.

The acquisition is in line with the Company's
the strategic intent of entering into new adjacent high growth/ attractive margin categories in the food and beverage space.

The cost of acquisition is Rs 5,100 crore.

Organic India Acquisition:

Organic India is primarily engaged in the business of manufacturing and sale of organic products including tea, infusions, herbal supplements and packaged foods. Tata Consumer entered into an agreement with Fabindia for a 100% acquisition of Organic India. The transaction is for a consideration of Rs 1,900 crore.

This move is consistent with Tata Consumer's strategic intent to expand its product portfolio and its target addressable market in fast-growing/high-margin categories. This acquisition will create a Health & Wellness platform for Tata Consumer Products.

Notably, farmers will benefit here as well. As Organic India has strong, long-standing relationships with 12,000+ farmers and unparalleled end-to-end organic certifications across the supply chain. It pioneered commercial cultivation of tulsi and introduced high-value medicinal crops for farming in India. It has a portfolio of over 100 products in the Health & Wellness space.

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.

Sunil D'Souza, MD & CEO, of Tata Consumer Products, said, "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."

He further added, "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."

Also, William Bissell, Managing Director of Fabindia said, " Organic India works with a community of tens of thousands of farmers who work only with socially and ecologically sustainable methods. We are confident that Organic India will continue to thrive with the Tatas' leadership."

Overall, the acquisition will provide significant synergy benefits in distribution, logistics and overheads apart from driving portfolio premiumization and unlocking additional channels and new markets. Structural growth drivers for this portfolio include increasing demand for Health & Wellness products, growing consumer awareness around wellness and changing consumer preferences.