Tata Consumer Products set to announce Rs 3,500 crore rights issue: Report

Tata Consumer Products is set to announce a Rs 3,500 crore rights issue to fund its acquisition of Capital Foods and Organic India, reported The Economic Times. Capital Foods and Organic India is valued at Rs 7,000 crore.

Fund Raising Plans

As per The Economic Times report, the Tata firm is aiming to diversify into high-margin, value-added food segments beyond commodities through these acquisitions. The rights issue decision comes after Tata's recent deals with Capital Foods, known for brands like Ching's Secret and Smith & Jones, and Fab India-backed Organic India. Organic India also gives Tata access to the pharma distribution sectors.

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While, Ching's Secret and Smith & Jones holds an entreprise valuation of Rs 5,100 crore, 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. The report also mentioned that Capital Foods and Organic India is set to provide a growth opportunity with gross margins in the 50-55% range.

The acquistion also comes at a time when Tata is looking to make its core tea a premium business, strengthen the pantry platform, and expand into snacking, mini-meals, and future growth supplements.

To expand the reach of Capital Foods and Organic India products, Tata Consumer Products will leverage its distribution breadth of 3.9 million outlets. The FMCG company has emphasised maintaining the authenticity of Organic India's organic products and benefiting from Tata's extensive testing protocols while giving an opportunity to build its health and wellness platform.