Biscuits-to-cigarettes maker ITC Ltd has inked an agreement to acquire Kolkata-based packaged spices maker Sunrise Foods Pvt. Ltd in what could turn out to be one of the biggest deals in Indian food sector.
This comes four months after VCCircle first reported that ITC is in talks to buy Sunrise. General Atlantic-backed Capital Foods Pvt. Ltd was another prospective buyer.
The country’s most valued consumer products company ITC said on Sunday it has entered into a share purchase agreement (SPA) to acquire 100% of the equity share capital of Sunrise, subject to fulfilment of various terms and conditions.
It did not share the value of the proposed transaction but as previously reported by VCCircle this is expected to be around $300 million. This would make it the single largest M&A by ITC ever.
Sunrise is a market leader in eastern India in the fast-growing spices category and has a presence both in the basic and blended spice segments.
The proposed acquisition is aligned with ITC’s strategy to rapidly scale up its FMCG Businesses in a profitable manner, leveraging its institutional strengths of deep consumer insight, a deep and wide distribution network, agri-commodity sourcing expertise, cuisine knowledge, strong rural linkages and packaging know-how, it said.
The firm said its Aashirvaad range of spices is already a market leader in Telangana and Andhra Pradesh and the proposed acquisition will augment ITC’s product portfolio and expand its footprint across the country.
ITC Spices, a unit of diversified ITC Ltd, was established as an independent business in 2004. Located in Andhra Pradesh, the unit is one of the leaders in food spices. It sells chilli, turmeric, ginger, seed spices, and blended spices. It handles around 35,000 metric tonnes of items annually.
Finalisation of the SPA to acquire Sunrise along with related processes were completed during lockdown conditions, reflecting the company’s agility and resilience in dealing with the new normal, ITC said.
Sunrise Foods had posted net sales of Rs 400 crore for the year through March 2018, up 16% from the year before, as per VCCEdge, the data research arm of Mosaic Digital. Its net profit climbed to Rs 41 crore from Rs 29 crore. Its financials for 2018-19 couldn’t been ascertained.
The company’s compound annual growth for the five years through March 2018 was almost 17%. Based on this growth rate, the company’s top line could touch around Rs 470 crore for 2018-19 and Rs 550 crore for 2019-20. At this level, the company could fetch a valuation of anywhere between Rs 2,200 crore and Rs 2,750 crore.
In October last year, a report in Business Standard had also said that Sunrise’s promoters were seeking a valuation of Rs 2,500 crore to sell the company.
This would make it one of the biggest transactions in India’s food sector. Other recent big-ticket deals in the sector include Baba Ramdev-led Patanjali Ayurved Ltd taking over edible oil maker Ruchi Soya for Rs 4,350 crore, Zydus Wellness Ltd buying the local unit of The Kraft Heinz Company for Rs 4,595 crore and French dairy giant Groupe Lactalis snapping up the milk products business of Prabhat Dairy Ltd for Rs 1,700 crore.
Another instance of a food-related transaction was Hindustan Unilever Ltd’s acquisition of GlaxoSmithKline’s Indian consumer nutrition business at a valuation of Rs 31,700 crore in the country's biggest FMCG deal.
Several spice makers are in the market currently to raise either private equity capital or sell shares to a strategic player.
Norwegian food company Orkla owned packaged food company MTR Foods is also set to take control of Kerala’s largest spice player Eastern Condiments Pvt. Ltd. Earlier, PE firm Warburg Pincus was in advanced talks to invest in the company.
In October 2019, Intergrow Brands Pvt. Ltd, a subsidiary of spices maker Synthite Industries Pvt. Ltd, raised $11.3 million from Bahrain-based alternative investment firm Investcorp.