Tata Consumer Products Limited (TCPL) recently made headlines with its announcement of acquiring Capital Foods and Organic India. TCPL will acquire a 100% stake in Capital Foods in a phased manner. The enterprise value for this acquisition is estimated to be ₹5,100 crore on a no cash-no debt basis. The acquisition will be completed in two stages: 75% of the equity shareholding will be acquired upfront, and the remaining 25% will be acquired within the next three years. Capital Foods, known for its popular brand Ching’s Secret, has a strong presence in the Desi Chinese and Western cuisines categories. With this acquisition, TCPL aims to expand its product portfolio and strengthen its pantry platform.
TCPL will also acquire a 100% stake in Organic India for ₹1,900 crore, along with an additional earnout for the shareholders linked to the company’s FY26 audited financials. Organic India, backed by FabIndia, is a leading player in the health & wellness segment, offering herbal supplements, tea & infusions, and organic packaged foods. The company has a robust organic supply chain and a trusted brand with a loyal consumer base. TCPL plans to leverage its distribution strength to accelerate momentum in the business and improve its margin profile.
These acquisitions align with TCPL’s strategic intent to expand its product portfolio and tap into the growing demand for global cuisines and health & wellness products. The overall size of the categories in which Capital Foods operates is estimated at ₹21,400 crore, while the total addressable market for Organic India’s categories is ₹7,000 crore in India and ₹75,000 crore in international markets. The acquisitions provide TCPL with significant market opportunities and synergies with its existing businesses in areas such as distribution, logistics, exports, and overheads.
While the acquisitions seem promising, TCPL’s valuation raises concerns. The company’s trailing-12-month price-to-earnings ratio of 54x is in line with its peers, despite lower sales and profit growth and single-digit return on equity (RoE). The recent acquisitions could further impact TCPL’s RoE and return on capital employed (RoCE) due to the higher equity base resulting from borrowing and rights issues. Analysts predict a potential net profit cut of 10% in FY26 and a RoCE dip of 350-400 basis points.
RTM Watch’s Take
Tata Consumer’s acquisitions of Capital Foods and Organic India reflect its strategic intent to expand its presence in the FMCG sector and tap into the growing demand for global cuisines and health & wellness products. These acquisitions provide TCPL with a strong foothold in the Desi Chinese, Western cuisines, and health & wellness segments. However, the company needs to address the valuation concerns and ensure efficient utilisation of capital to generate higher returns. With its distribution strength and brand reputation, TCPL has the potential to leverage these acquisitions and drive growth in the competitive FMCG market.
