TCPL to fund two acquisitions with cash reserve

New Delhi: Tata Consumer Products Ltd (TCPL) would fund its acquisitions of Capital Foods Ltd and Organic India Ltd having a combined enterprise value of Rs 7,000 crore, through internal cash reserve and bridge financing, MD and CEO Sunil D’Souza said on Sunday.

Both the acquisitions operate in areas which offer “huge runway for growth”, where margins are “far accretive” and business is growing at a healthy pace, he said.

Besides, TCPL will continue to strengthen its portfolio in the food & beverage segment organically to fill the gaps but it will also scout for inorganic growth opportunities if someone offers a better brand, technology and team, he added.

Last Friday, TCPL announced complete acquisition of Capital Foods, which owns brands like Ching’s Secret and Smith & Jones, at an enterprise valuation of Rs 5,100 crore and Fab India-backed Organic India, which operates in the health and wellness category, at an enterprise value of Rs 1,900 crore.

The Tata Group FMCG arm would fund half of these two all-cash deals through internal accruals. “We have a decent amount of cash sitting on our balance sheet, but obviously will require far beyond that to make sure we fund it,” said D’Souza.

TCPL’s board is scheduled to meet on January 19 to consider the proposal for fundraising by debt issue in the form of commercial papers/debentures and equity issues.

“Right now the proposal that we are putting in front of our board is a short- term, whichever way we do on equity which is going to take time and therefore we will look at a short-term debt. I would say bridge financing with that but we will also look at equity funding further on. Right now we are exploring all options including a possible rights issue as we go forward,” he said.

TCPL, which is a relatively new company in the FMCG sector, has made some acquisitions in the past to increase its play in the food segment and would continue to evaluate more options.

“This is the very start of our journey. We have a long way to go. Therefore we intend to keep dry powder ready in case options come up in the future as well,” he said.