ITC acquires spice-maker Sunrise in all-cash deal for Rs 2,150 crore

Diversified conglomerate ITC has acquired 100 per cent equity stake of Sunrise for Rs 2,150 crore, its biggest acquisition to date.

The upfront consideration of Rs 2,150 crore is on a cash-free, debt-free basis. In addition, the sellers are entitled to contingent consideration of an amount not exceeding Rs 150 crore, which is payable upon Sunrise achieving mutually agreed operational and financial milestones over a period of two years, ITC said late on Monday. 

The share purchase agreement for Sunrise was completed after the lockdown and ITC announced the acquisition on May 24. With the transaction, the company has added a 70-year-old brand and a market leader in eastern India to its portfolio. In 2019-20, Sunrise clocked in a turnover of Rs 591.50 crore; its net worth as of March 31, 2020, was Rs 242.89 crore. However, ITC said the acquisition would augment its product portfolio and was aligned to its aspiration to scale up its spices business and expand its footprint in the country. 

With its range of whole spices, basic ground spices, blended spices, instant mix, Sunrise has a more than 50 per cent market share in West Bengal and is a leader in the East with a 15-20 per cent share. The acquisition — the first major after Sanjiv Puri became chairman — will add edible oil to ITC’s portfolio, a segment the company exited by selling its Sundrop brand. The Sunrise product portfolio includes mustard oil. 

According to an HDFC Securities report, Sunrise has been growing strongly and clocked 24 per cent and 22 per cent CAGR over the last nine years (FY09-18) and three years (FY15-18).

ITC already has a presence in the spices segment through its Aashirvaad range, which is a strong brand in Telangana and Andhra Pradesh and Sunrise was expected to fill the gap in the blended spices market. A post-first quarter results review from Emkay Global Financial Services said Sunrise Foods could lead to a further step-up in margins and growth. According to analysts, ITC could look at more such acquisitions as many regional brands could be available at good valuation post-Covid. Non-cigarettes FMCG has been a focus area for ITC, which already has its task cut out having set a target of Rs 1,00,000 crore revenues by 2030 and acquisitions are expected to help achieve it.  

During the pandemic, the non-cigarette FMCG, particularly foods, was the silver lining for the company. Revenues from the segment were up 12.2 per cent on a comparable basis and 18.8 per cent, excluding education and stationery products business that was impacted by the pandemic. 

Segment PBIT was up 61 per cent with Ebitda margin expansion of 170 basis points. However, revenues from cigarettes were down by 29.5 per cent and analysts said the volume drop was 40 per cent on account of the nationwide lockdown.