Diversified conglomerate ITC has emerged as a strong contender to acquire controlling stake in Kolkata-based packaged spice maker Sunrise Foods as it looks to build its food business further and take on competitors such as Hindustan Unilever, PepsiCo and Britannia, sources told Moneycontrol.
An exclusivity agreement has been signed between both parties and the deal valuation is pegged in the range of Rs 2,000-2,500 crore, a source said. “The sale process has been on for the last four to five months and is being handled by investment bank JM Financial. Several private equity players had expressed interest earlier and now ITC has emerged as a strong contender,” the source said.
Another source said the target company is in ITC's backyard and presents locational advantages, adding that through this proposed deal, the conglomerate can add to its product pipeline and bolster its presence in the spices segment. "Most domestic spice brands are scattered in different regions and don’t have a full-fledged pan-India presence. Due to its immense network, ITC can easily scale up Sunrise Foods beyond its core market in West Bengal,” the source said.
A third source said the recent market volatility due to the outbreak of novel coronavirus, or COVID-19, is likely to have impacted pace of negotiations. In terms of the deal structure, it could be mixture of cash and equity which is a mode preferred by the sellers, the person added.
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All the persons Moneycontrol spoke to did not wish to be named.
Responding to an email questionnaire from Moneycontrol, a spokesperson for ITC, which runs businesses as diverse as food and hospitality, said, "As per company policy, we do not comment on market speculation.”
Moneycontrol has sent reminders and is awaiting email responses from Sunrise Foods and JM Financial and will update this article as soon as it hears from them.
The Sharma family-promoted Sunrise Foods counts brands such as Everest Spices and MDH Masala as rivals and offers a range of products such as whole spices, basic ground spices, blended or mix spices, instant mix, compounded asafoetida, mustard oil and pappadums. Founded in 1902, the company owns four factories in Bikaner, Jaipur, Agra and Kolkata and is present across nine states.
Sunrise’s operations are largely centred in east India, including the northeast states. It has also expanded to Bangladesh and Nepal. Sales in FY19 are estimated at around Rs 1,000 crore. Earlier media reports have named private equity firms Carlyle, TA Associates and Norway’s Orkla Foods as interested suitors.
ITC has been looking to tilt the revenue mix from its mainstay tobacco to FMCG across categories. “To accelerate growth in the FMCG businesses, the endeavour is not only to fortify the existing categories towards delivering industry leading performance but also to foray into newer categories and sub-segments. This would be supported by multi-dimensional investments as well as strategic opportunities for acquisitions,” ITC's Sanjiv Puri told shareholders in July 2019 during his debut AGM address as chairman.
ITC posted a net revenue of Rs 44,415 crore and profit after tax of Rs 12,464 crore for FY19. Revenue from FMCG and related businesses at Rs 12,505.28 crore. Under its FMCG segment, ITC sells packaged foods, personal care, and stationery housing brands like Aashirwad, Sunfeast biscuits, Yippie noodles, B Natural juices, Vivel soaps and Bingo chips.