Tata Consumer - Growing Footprint In The F&B Industry: Motilal Oswal

Motilal Oswal Report

Tata Consumer Prdoucts Ltd.’s acquisitions of Capital Foods Pvt. Ltd. and Organic India Pvt Ltd. are in line with their strategic priority to expand the total addressable market into adjacent, high-margin, and high-growth categories. The key highlights are as follows:

These acquisitions will enable Tata Consumer to advance in its journey to become the leading fast moving consumer goods player, offering a wide range of products across pantry, liquid, mini meals, and sustainable categories. The incremental TAM in India and internationally will increase to ~Rs 1 trillion with these new additions.

Through these acquisitions, Tata Consumer can benefit from multiple synergies, including access to new markets, wider distribution reach, optimized trade margins via increased shelf space, better operating leverage through economies of scale, and higher margins.

We have factored in the financials of both the companies, assuming a fundraise via a rights issue amounting to Rs 35 billion, which is 50% of the total deal value (or 61% of the immediate funding requirement of Rs 57.25 billion).

This is leading to an earnings per share dilution of 3%/2% in FY25E/26E and it will be EPS accretive from the third year of operations.

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