Tata Consumer Products has potentially expanded its product portfolio with the embarkment of two esteemed Indian brand companies- Organic India and Capital Foods, known for Ching’s Secret sauces and noodles. It will acquire 100 pc of the stakes of these two companies.
Tata Consumer bought Ching’s Secret and Smith & Jones brands for an enterprise value worth Rs 5,100 crore. It is a share purchase and an all-cash deal.
For Organic India, a product by Fabindia, Tata would be paying an enterprise value of Rs1,900 crore.
The deal evaluates Organic India over 5 times its FY24 estimated sales of Rs560-570 crore.
Tata Consumer Products is famously known for teas, coffee, condiments, and cereals. Its tea and beverages portfolio synergizes with Organic India products, selling teas, infusions, and herbal supplements; the addition of Chinese taste by Ching’s Secret opens gates to permeate into the Indian Chinese instant noodle market, expected around Rs1,200 crore.
Smith & Jones, on the other hand, will add an extra flavor of in-home cooking of Italian and other Western cuisines.
The Total Addressable Market (TAM) for the categories Organic India operates in is Rs 7,000 crore in India, while Internationally, it stands at Rs 75,000 crore.
Ching’s Secret dominates the Indian Chinese instant noodle market, with about 75-80% market share. Its competitors include Top Ramen and Wai Wai Noodles.
However, Nestle’s Maggi and ITC’s Yippee brands are competitive bottlenecks in the instant noodles segment.
Sunil D’Souza, MD & CEO, of Tata Consumer Products, said: “We are excited to welcome Capital Foods into Tata Consumer Products. We believe this is a good strategic and financial fit. 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. The strong brand recall of Ching’s Secret and Smith & Jones coupled with our operational strength across channels makes us extremely confident of driving top-line growth and realising cost synergies. This transaction will accelerate momentum in our business and is margin accretive to our business. We are excited about bringing Organic India into Tata Consumer Products.”
This transaction aligns well with Tata Consumer’s overall strategic objectives and presents exciting market opportunities in the rapidly growing Health & Wellness segment.”
The agreement with Capital Foods values it 6.5-6.8 times its FY24 sales, estimated at Rs750-770 crore.
The top line of Capital Foods in FY23 was reckoned at Rs900 crore, almost doubling its FY22 sales of Rs580 crore.
“There are significant synergy benefits with the existing businesses of Tata Consumer Products in areas spanning distribution, logistics, exports, and overheads. The overall size of the categories in which Capital Foods operates is estimated at Rs 21,400 crore’’, TCPL disclosed.
Tata Consumer will acquire Capital Foods in two rounds, beginning with picking 75% of the equity shareholding upfront and the balance 25% shareholding within the next three years.
Investors such as Invus Group, with a 40% stake, and private equity firm General Atlantic, with a 35% stake, will make an exit from the company in the first round.
The balance 25% held by founder Ajay Gupta, will be acquired within three years for Rs1,275 crore.
Shantanu Rastogi, Managing Director and Head of India for General Atlantic said, “We have had a great partnership with Ajay Gupta in scaling Chings and Smith & Jones into the most adored brands in their categories. We wish Ajay and Tata Consumer Products the best in the next phase of development of Capital Foods.”