Tata Consumer Products plans Rs 3,500 cr rights issue for acquisitions

TCPL aims to diversify into high-margin, value-added food segments beyond commodities through its acquisitions of Capital Foods and Organic India, valued at Rs 7,000 crore

Tata Consumer Products Ltd (TCPL) is set to announce a Rs 3,500 crore rights issue to fund its acquisitions of Capital Foods and Organic India, valued at Rs 7,000 crore, according to a report by The Economic Times (ET). TCPL aims to diversify into high-margin, value-added food segments beyond commodities through these acquisitions that were announced last week.

The rights issue follows the company's recent deals with Capital Foods, known for brands like Ching's Secret and Smith & Jones, and Fab India-backed Organic India, offering access to the pharma distribution channel.

The acquisition of Capital Foods was announced last week. Ching's Secret and Smith & Jones hold an enterprise valuation of Rs 5,100 crore, and Organic India has an enterprise value of Rs 1,900 crore. The Tata Group's FMCG arm is expected to fund half of these deals through internal accruals.

Capital Foods and Organic India is set to provide a growth opportunity with gross margins in the 50-55 per cent range. The acquisitions also align with TCPL's platform strategy to make its core tea a premium business, strengthen the pantry platform, and expand into snacking, mini-meals, and future growth supplements.

TCPL will leverage its distribution breadth of 3.9 million outlets to expand the reach of Capital Foods and Organic India products. The company has emphasised maintaining the authenticity of Organic India's organic products and benefiting from Tata's extensive testing protocols. The acquisitions will also help Tata Consumer build its health and wellness platform.

As reported earlier by Business Standard, MD and CEO Sunil D'Souza has stated the company's goal to become a large FMCG company. According to D'Souza, they are still at the very start and any "gaps" in its portfolio are "by choice and not by default". He added that they are not in any rush to grow their portfolio and are looking to build food and beverage first.