Capital Foods sale: Nestle, ITC in last lap, deal at up to ₹5k cr
3 min read 24 May 2023, 11:32 PM ISTNestle India is the Indian subsidiary of Swiss multinational Nestle SA, the world’s largest food company, known for its products in food, beverages, chocolate, and confectioneries categories.
PremiumMumbai: Food giants Nestle India Ltd and ITC Ltd have emerged as the finalists in the race for leading ingredient maker Capital Foods Pvt. Ltd, two people aware of the matter said. A deal may value the maker of Ching’s Secret and Smith & Jones food ingredients between ₹4,000 crore and ₹5,000 crore, they said.
“Nestle’s bid is the highest. ITC’s bid is very close to that," one of the two people said on condition of anonymity.
For several months, Swiss multinational Nestle SA, the world’s largest food company, has been in talks with Mumbai-based Capital Foods, which makes popular Chinese food ingredients. The company, which claims to be India’s largest culinary food ingredient maker, has also seen interest from marquee names such as Kraft Heinz, ITC, Hindustan Unilever Ltd and Tata Consumer Products.
“We do not comment on rumours and speculations," a Nestlé India spokesperson said in response to a query. “We do not comment on market speculation," an ITC spokesperson responded. An email sent to Capital Foods remained unanswered.
The person cited earlier said homegrown conglomerate ITC has valued Capital Foods around ₹4,000 crore, while Nestle’s bid values it between ₹4,000 crore and ₹5,000 crore. The discussions are at an advanced stage, and an acquisition is likely to be announced within a month.
Nestle India is the Indian subsidiary of Swiss multinational Nestle SA, the world’s largest food company, known for its products in food, beverages, chocolate, and confectioneries categories. Maggi, a popular global food brand in seasonings, instant soups, and noodles, is owned by Nestle. Nestle has over 60% market share of India’s ₹11,600-crore instant noodles segment.
The deal, if concluded, may be one of the largest buyouts of a homegrown consumer brand in the food space.
If Nestle wins Capital Foods, it will not only strengthen its presence in traditional Indian households but also give the company an immediate entry into the fast-growing Chinese food ingredient space, where Nestle currently lags.
Ching’s Secret makes chutneys, instant soups, Chinese masalas, Chinese sauces, hakka noodles and flavoured noodles, catering to the demand for so-called ‘Indian Chinese’ food products. On the other hand, Smith & Jones brand is available across pasta masala, pizza ketchup and cooking pastes. The 25-year-old company, which has manufacturing facilities in Nasik, Kandla and Vapi, is jointly owned by US private equity group General Atlantic (35.43%) and Artal Asia Pte. (39.94%), a European family office and investment arm, Wildflower Family Trust (22.08%) and founder chairman Ajay Gupta (2.55%).
In the cooking paste and condiments space, Capital Foods competes with Mother’s Recipe, Dabur Ltd and ITC Ltd. According to an analyst who spoke on condition of anonymity, Capital Foods likely clocked FY23 revenue of around ₹840 crore, and at a deal size of ₹4,000-5,000 crore, it will be valued at 4.5-5 times its earnings. The company currently has a revenue run rate of ₹1,000 crore, he added.
According to Capital Foods’ latest disclosure with the Registrar of Companies, it posted a revenue of ₹580 crore in FY22, down 14% from a year earlier. Due to the covid-19 pandemic and the ensuing closure of hotels and restaurants, the company slipped into losses at ₹7.4 crore in FY22 against a net profit of ₹68.7 crore in FY21. In January, ITC said the conglomerate is fortifying its presence in the ₹45,000 crore, burgeoning nutrition-led healthy foods space with a proposed strategic investment in Sproutlife Foods Pvt. Ltd, a direct-to-consumer start-up engaged in the manufacture and sale of products catering to health-conscious consumers under the label ‘Yoga Bar’.
ITC will acquire 100% of Sproutlife over 3 to 4 years. A 47.5% stake in SFPL is planned to be acquired, in tranches, by 31 March 2025, and the balance stake will be acquired, basis pre-defined valuation criteria, subject to other conditions agreed to in the binding documents, a disclosure by ITC said. Yoga Bar has built a strong food portfolio through nutrition bars, muesli, oats and cereals.
If ITC is able to outbid Nestle to acquire Capital Foods, it will enable the Kolkata-based conglomerate to expand its presence in the consumer goods and ready-to-cook food ingredients space.
ITC’s food offerings include Aashirvaad multi-grain atta, Farmlite range of biscuits, Sunfeast protein shake, and Nutrilite B Natural beverages, among many others.
