Tata Consumer Products Ltd (TCPL), the Tata Group’s FMCG arm, has announced to acquire two companies – Capital Foods and Organic India – in separate deals that will expand its product portfolio and addressable market in fast-growing and high-margin categories.
Capital Foods: A leading player in instant noodles and sauces
Capital Foods is the owner of popular brands such as Ching’s Secret, Smith & Jones, and Raji. It operates in categories such as instant noodles, sauces, soups, masalas, and ready-to-eat meals. The company has a pan-India distribution network and exports to over 40 countries. It reported a revenue of Rs 1,200 crore in FY 2020-21.
TCPL will acquire a 100 per cent stake in Capital Foods on an enterprise value of Rs 5,100 crore in a phased manner. The company has agreed to acquire 75 per cent shareholding of the target company from existing investors, including Invus Group and General Atlantic. The balance 25 per cent shareholding will be acquired within three years.
The acquisition of Capital Foods will enable TCPL to enter the large and growing instant noodles market, which is estimated at Rs 6,000 crore. It will also strengthen its presence in the sauces and soups segments, which are estimated at Rs 2,000 crore and Rs 500 crore respectively. The company expects to leverage its distribution, logistics, exports and overhead synergies with Capital Foods.
Organic India: A pioneer in organic food and beverages
Organic India is a leading player in organic food and beverage products, such as teas, infusions, supplements, honey, ghee, oils, spices, and snacks. The company sources its raw materials from over 3,000 organic farmers across India and has a strong presence in the domestic and international markets. It reported a revenue of Rs 350 crore in FY 2020-21.
TCPL will acquire a 100 per cent stake in Organic India in an all-cash deal at an enterprise value of Rs 1,900 crore, along with an additional earnout for the shareholders linked to FY 2025-26 audited financials of the company.
The acquisition of Organic India will enable TCPL to create a health and wellness platform that aligns with the growing consumer preference for natural and organic products. The company also sees opportunities to cross-sell its existing products through Organic India’s distribution channels.
A strategic move to enhance TCPL’s growth prospects
TCPL’s managing director and CEO Sunil D’Souza said that the acquisitions are consistent with the company’s strategic intent to expand its product portfolio and its target addressable market in fast-growing and high-margin categories.
“These acquisitions will help us build a stronger pantry platform with a portfolio of trusted brands that cater to evolving consumer needs across food occasions,” he said.
TCPL is one of the largest branded tea players in the world with brands such as Tata Tea, Tetley, Eight O’Clock Coffee, Himalayan Water, Tata Salt, Tata Sampann, and Soulfull. The company has been on an acquisition spree in recent years to diversify its portfolio and tap into new segments.
The acquisitions of Capital Foods and Organic India are subject to customary closing conditions and regulatory approvals. The transactions are expected to be completed by March 2024.