Tata Consumer Products Ltd (TCPL) announced on Friday that it has entered into definitive agreements for the complete acquisition of Capital Foods, the proprietor of Ching’s Secret and Smith & Jones, and Organic India, a Fabindia-supported producer of organic teas and health products. While TCPL did not disclose the exact cost of the Capital Foods acquisition, individuals familiar with the matter indicated that the valuation of the instant noodles and condiments manufacturer stood at INR 5,100 crore. TCPL stated that the acquisition of Organic India would amount to INR 1,900 crore.
TCPL is set to acquire 75% of Capital Foods initially, with the remaining 25% to be acquired over the next three years. Both Invus Group and the US private equity group General Atlantic will divest their current stakes of 40% and 35%, respectively. Invus, functioning as a European family office and investment arm, will be part of the divestment.
“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,” TCPL said in a stock exchange filing.
Nestle India’s Position Amid Tata Consumer Products’ Move
“The development is mildly negative for Nestle India as Nestle was also likely one the bidders for Capital Foods and competition in noodles and cooking aids will increase once TCPL acquires Capital Foods as it can scale it up further,” Nuvama Equities said in a note.
TCPL said that Capital Foods has strong umbrella platform brands with a distinctive product portfolio tailored for in-home consumption in rapidly expanding categories. Ching’s Secret, a market leader in desi Chinese products, encompasses a range of items including chutneys, blended masalas, sauces, and soups. Additionally, Smith & Jones focuses on facilitating in-home preparation of Italian and other Western cuisines.
The acquisition will empower TCPL to broaden its product portfolio and enhance its pantry platform. Substantial synergy benefits will be realized through the integration with TCPL’s existing businesses, encompassing distribution, logistics, exports, and overheads.
Continue Exploring: Tata Consumer Products set to expand portfolio with strategic acquisitions of Capital Foods and Organic India
“We believe this is a good strategic and financial fit,” said Sunil D’Souza, TCPL MD and CEO. “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.”
Shantanu Rastogi, managing director and head, India, at General Atlantic, said, “We have had a great partnership with (Capital Foods founder) Ajay Gupta in scaling Ching’s and Smith & Jones. We wish Ajay and Tata Consumer Products the best in the next phase of development of Capital Foods.”
TCPL will complete the full acquisition of Organic India through an all-cash transaction amounting to INR 1,900 crore.
“The board of directors approved the acquisition of up to 100% of the equity share capital of Organic India Pvt Ltd,” TCPL said in an exchange filing. “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 and wellness platform.”
The total market size for the categories in which Capital Foods operates is estimated to be INR 21,400 crore.
