Motilal Oswal's research report on Tata Consumer
Tata Consumer (TATACONS)’s acquisitions of Capital Foods Pvt. Ltd (CF) and Organic India Pvt Ltd (OI) are in line with their strategic priority to expand the total addressable market (TAM) into adjacent, high-margin, and high-growth categories. The key highlights are as follows: These acquisitions will enable TATACONS to advance in its journey to become the leading FMCG player, offering a wide range of products across pantry, liquid, mini meals, and sustainable categories. The incremental TAM in India and internationally will increase to ~INR1t with these new additions. Through these acquisitions, TATACONS can benefit from multiple synergies, including access to new markets, wider distribution reach, optimized trade margins via increased shelf space, better operating leverage through economies of scale, and higher margins. We have factored in the financials of both the companies, assuming a fundraise via a rights issue amounting to INR35b, which is 50% of the total deal value (or 61% of the immediate funding requirement of INR57.25b). This is leading to an EPS dilution of 3%/2% in FY25E/26E and it will be EPS accretive from the third year of operations.
Outlook
We expect a CAGR of 13%/18%/25% in revenue/EBITDA/PAT over FY23-26. We arrive at our SoTP-based TP of INR1,350 and reiterate our BUY rating on the stock.
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