ITC Ltd is in early discussions with Norway’s Orkla ASA to acquire its Indian businesses MTR Foods Pvt. Ltd and Eastern Condiments Pvt. Ltd for about $1.4 billion, two people aware of the talks said, as the Kolkata-headquartered food giant looks to expand its offerings in the southern market.
The stake sale is a change of plan for Orkla, which was considering an IPO for the Indian business as recently as September 2024. The Norwegian company entered India by acquiring ready-to-eat food maker MTR in 2007 and spicemaker Eastern in 2020.
“ITC is ready to evaluate the acquisition because the company is keen on some of the key southern markets in the food space. The company has been planning to increase the contribution of spices and edibles in its overall income for a while now,” the first person said.
IPO vs private sale
To be sure, Orkla has not dropped the IPO plan. If the company does not get a good a valuation in a private sale, Orkla will still go ahead with the Indian IPO, the people cited above said on the condition of anonymity.
Replying to a Mint query, an Oslo-based spokesperson for Orkla said, “We do not comment on unfounded market rumours or speculation.” An email sent to ITC on Monday remained unanswered. ITC’s chairman and managing director Sanjiv Puri did not respond to an email and a text message.
Orkla is contemplating if a majority stake sale through a private deal can fetch a better valuation than the IPO, one of the two people said.
India’s spices and ready-to-eat market
For ITC, which recently acquired FMCG brands Prasuma, an acquisition would be in line with its strategy to grow faster in newer geographies, the people said.
MTR Foods and Eastern lead the market for ready-to-cook foods and spices in Andhra Pradesh, Karnataka, Tamil Nadu and Kerala.
After the launch of the MTR brand in the food space in 1950 by the Bengaluru-based Maiya family, MTR Foods has gone through several rounds of diversification, before becoming a top player in the spices and ready-to-cook space in South India. MTR and Eastern are the two main businesses under Orkla India. In fiscal 2024, Orkla India earned over 80% of its revenues of over ₹2,400 crore from MTR Foods and Eastern.
MTR Foods also sells several products in North America, West Asia, Japan and some South-East Asian countries. MTR’s South Indian range of products is a key category in many international markets.
If the deal goes through, ITC, which predominantly leads in the eastern and northern states, may become a market leader in the food space in some of the southern states as well.
According to research firm IMARC Group, India’s spices market size was worth ₹2,00,643.7 crore in 2024, and is expected to touch ₹5,13,253.9 crore by 2033, exhibiting a CAGR of 10.56% during the period.
MTR Foods and Eastern Condiments got three-fourths of their sales from southern states in 2024. However, competition in the spices and ready-to-cook space is increasing with more brands and unorganized players coming in.
Pointing at the rising competition, on 7 April, 2024, in an interview with The Economic Times, Orkla Foods Europe chief executive Atle Vidar Nagel Johansen said, “In India, the route to the consumer is more complex than what we are used to from the European markets. The competitive intensity is on a higher level. There is a big difference between the Italian and the Scandinavian kitchen. That’s very similar to differences you find between south India, east India, north India and maybe more granular than that.”
Competitive landscape
East and North India spices and ready-to-cook markets are dominated by MDH, Everest and some of the ITC owned brands. Overall in India’s organized spices market, Everest and MDH are the top players.
The competition has intensified in the past five years. Three years ago, Dabur India bought a 51% stake in Badshah Masala for ₹588 crore, while ITC acquired spices manufacturer Sunrise Foods in an all-cash deal valued at ₹2,150 crore a little over four years ago.
In an effort to expand its edibles offerings ITC has been scouting for opportunities.
On 6 February, ITC announced the acquisition of Prasuma, which makes frozen, chilled and ready-to-cook foods. Prasuma is a specialist in oriental cuisine (such as momos, baos and Korean fried chicken), and sells delicatessens and raw meats as well. The acquisition will be completed by June 2028.
If the latest talks to acquire MTR and Eastern go through, ITC will gain an upper hand against Everest and MDH in several states, especially in the south.
