Tata Consumer - Increasing Presence In Kitchen Shelf: Motilal Oswal

Motilal Oswal Report

Tata Consumer Products Ltd. has acquired 100% equity stake in Capital Foods Pvt. Ltd. (owner of ‘Ching’s Secret’ and ‘Smith & Jones’ brands) and Organic India Pvt. Ltd. (a ‘better for you’ organic brand spanning food and beverages and Nutraceutical categories) for a total consideration of Rs 70 billion. Key highlights are as follows:

• Capital Foods is the market leader of Desi Chinese products in India with an estimated revenue of ~Rs 7.5 billion in FY24 (accounting for ~5% of the incremental revenue in FY24E), while Organic India products span across food and beverages and herbal and traditional supplements with an estimated revenue of Rs 3.6 billion in FY24 (accounting for ~2.4% of the incremental revenue in FY24E).

• These acquisitions will enable Tata Consumer to move forward in its journey to emerge as the leading fmcg player with offerings spanning across pantry, liquid, mini meals and sustainable categories.

• The incremental total addressable market, India and International, from these new additions will be ~Rs 1 trillion.

• The acquisition is expected to be earnings per share accretive for the company from the third year of operations. It has been executed at industry-standard valuations, with Capital Foods/Organic India acquisition valued at ~6.8 times/5.2 times enterprise value/sales on FY24E sales versus ~6.4 times for Tata Consumer.

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