ITC HAS ACQUIRED 100% OF THE SHARE CAPITAL OF SRESTA NATURAL BIOPRODUCTS

News: ITC has acquired 100% of the share capital of Sresta Natural Bioproducts that sales under the '24 Mantra Organic' brand, to expand its presence in the high growth organic products segment in both Indian and overseas markets. 24 Mantra portfolio comprises a wide range of 100+ organic products spanning branded grocery staples, spices and condiments, edible oils, beverages, etc. SNBPL has a strong international presence (~50% of revenues) with a deep connect with the Indian diaspora. SNBPL’s vertically integrated supply chain promotes sustainable livelihoods for its network of approx. 27,500 farmers spread across approx. 1.4 lakh acres of certified organic land in 10 states. The Indian organic market (domestic and exports) is currently estimated to be Rs. 10,000 cr. in size. The category has high growth potential given the low penetration levels domestically as well as globally and the growing consumer preference towards natural and organic food products. ITC has acquired the company for Rs472crore with Rs400crore to be paid upfront and Rs72.5crore to be paid in next two years. The deal is value at 1.5x the acquired company’s FY24 revenues of Rs306crore. Further, ITC will acquire the balance 73.5% stake in Mother Sparsh Baby Care over a period of 2-3 years. The company will make a total investment of around Rs 81 crore in two tranches via a combination of primary subscription and secondary share purchase by the first quarter of 2026-27. Post the above acquisition, the Company’s total investment in Mother Sparsh will stand at appx. Rs126crores and the total stake will increase from 26.5% at present to up to 49.3% on a fully diluted basis.

View: The acquisition of 24 Mantra Organic brands is a strategic fit with ITC’s food business bridging the gap in its portfolio. With its own sourcing ability having tie-up with 27,500 farmers across 71 clusters in 10 states has a potential to grow revenues by 3x of current sales of ~Rs300crore. However, once the brand integrates into ITC’s agri sourcing and distribution capabilities, the potential revenue scale-up will be higher compared with existing sourcing and distribution capabilities. ITC sources around 30 lakh tonnes of from over 20 crop value chain clusters, which 24 Mantra Organic brands can leverage upon to scale-up its revenues. The company has done four acquisitions in the FMCG space in the last 1 year (3 in food segment and 1 in non-food segment), which has potential to add ~Rs1500crore revenues in FY27 (~5% of non-cigarette FMCG revenues and 2% of total revenues). The category in which the acquisitions are presence has potential to generate higher margins post scale-up adding to overall profitability of the non-cigarette FMCG business (currently 10%+ EBIDTA margins). The acquisitions are medium to long term positive with large focus on expanding the product portfolio.

Impact: Positive