Tata Consumer acquires Capital Foods, Organic India

New Delhi: Tata Consumer Products Ltd (TCPL) on Friday signed definitive agreements to acquire 100% equity shares of Capital Foods, owner of the brands Ching’s Secret and Smith & Jones, and Organic India, a company that sells organic herbal teas and health foods. While the acquisition of Capital Foods will be in a phased manner, TCPL will acquire 100% of Organic India in an all cash deal.

TCPL will pay an enterprise value on a no cash no debt basis of 5,100 crore for 100% stake in Capital Foods. While 75% of the equity shareholding will be acquired upfront, the remaining 25% will be acquired within the next three years, TCPL said in a filing to the exchanges on Friday evening. For a 100% stake in Organic India, TCPL will pay 1,900 crore, along with an additional earnout for the shareholders linked to FY26 audited financials of the company.

The estimated turnover of Organic India for FY24 is 360 370 crore, up from 324.4 crore in FY23. The signing of the share purchase agreement with Capital Foods has ended months of speculation over the latter’s ownership that saw rivals such as Nestle and ITC bid aggressively. In May last year, Mint reported that food giants Nestle India and ITC were in the fray to acquire Capital Foods.

The acquisition is consistent with Tata Consumer’s strategic intent to expand its product portfolio and its target addressable market. Capital Foods has strong umbrella platform brands with a portfolio of unique products for in home consumption in fast growing categories. In FY23, Capital Foods reported revenue from operations of 705.5 crore.

The estimated turnover of Capital Foods for FY24 is 750 to 770 crore. Ching’s Secret is a market leader in Desi Chinese across its product categories chutneys, blended masalas, sauces and soups. Smith & Jones is a fast growing brand catering to in home cooking of Italian and other Western cuisines.

“Overall, Capital Foods has number one or number two positions in five large categories. This acquisition will enable Tata Consumer Products to expand its product portfolio and further strengthen its pantry platform. There are significant synergy benefits with the existing businesses of Tata Consumer Products in areas spanning distribution, logistics, exports and overheads," TCPL said in its filing.

Sunil D’Souza, MD & CEO, 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." “This transaction will accelerate momentum in our business and is margin accretive to our business," said D’Souza.

On Organic India, he 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.

Organic India’s differentiated products and robust supply chain together with Tata Consumer’s distribution strength across channels in India and specific geographies globally make us confident of accelerating momentum in the business while improving our margin profile." The overall size of the categories in which Capital Foods operates is estimated at 21,400 crore, while the total addressable market for the categories that Organic India is present in is 7,000 crore in India and 75,000 crore in international markets.

Structural growth drivers for the category include continued growth in income levels, evolving consumer preferences leading to increased salience of global cuisines in in home cooking and increasing need for convenience. This is especially true post covid. Capital Foods, a 25 year old company with manufacturing facilities in Nasik, Kandla and Vapi, is jointly owned by US private equity group General Atlantic (35.43%) and Artal Asia Pte.

(39.94%), a European family office and investment arm, Wildflower Family Trust (22.08%) and founder chairman Ajay Gupta (2.55%). “Tata Consumer Products is a multi conglomerate that spans the globe with quality food ingredients and products. In 28 years, from 3 bottles of sauces, to an entire ‘Desi Chinese’ cuisine block, Ching’s Secret has become a brand to be reckoned with.

Smith & Jones covers another food block with tremendous potential. Together, Tata and Capital Foods can create a multinational culinary brand that includes multiple food categories," said Ajay Gupta, Founder of Capital Foods. Francis Cukierman, Managing Director at Invus, the global advisor of Artal (a European evergreen family investor) said, “We are thrilled to have worked closely with Ajay Gupta and contributed to the journey of Capital Foods since 2013.

Artal Asia, the Singapore subsidiary of Artal Group, has decided to continue for the compelling next chapter of growth of Capital Foods with Tata Consumer for the next few years." Organic India has a geographical footprint covering over 48 countries, substantially from India and the US. Its product portfolio spans premium and high growth categories focused on sustainable living herbal supplements, tea & infusions and organic packaged foods.

Backed by FabIndia, Organic India has relationships with 12,000+ farmers and 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.

William Bissell, Managing Director, Fabindia said, “Tata is India’s most venerated and dynamic brand. For over 150 years, it has stood as the visionary exemplar of Indian values: fairness, preservation of civilizational traditions, harmony with the natural world, and social uplift for all. That is why we are immensely excited that they will be guiding Organic India through its next chapter and stewarding the vital mission for which Organic India stands.

We are confident that Organic India will continue to thrive with the Tatas’ leadership." Kotak Investment Banking was TCPL’s exclusive financial advisor on the deals. Livemint tops charts as the fastest growing news website in the world to know more. Unlock a world of Benefits! From insightful newsletters to real time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away!.