Shares of ITC climbed over 4 per cent in Tuesday’s trade, as analysts believe its decision to acquire spices manufacturer Sunrise Foods Private is a strategic fit, and signals the company’s intent to make use of its Rs 33,000 crore cashpile. The stock is priced to perfect, they said.
The stock rose 4.02 per cent to Rs 193.85 on BSE. CLSA has a price target of Rs 190 on the stock, as it feels Sunrise will strengthen ITC’s spices division in East India.
At present, the size of the domestic spices market is estimated at Rs 75,000-80,000 crore. Top 10 players account for 50 per cent of the branded market, which is pegged at Rs 15,000 crore and growing in mid-to-high-teens.
While Everest, MDH and Eastern are prominent national brands, Kolkata-based Sunrise is a regional player similar to Aachi, Sakthi, Goldiee and Catch.
Motilal Oswal Securities expects Sunrise, the biggest acquisition till date by ITC, to add 7 per cent potential revenues to the FMCG business. The FMCG major already has presence in the branded spice category through its ‘Aashirvaad’ brand.
ITC, the brokerage said, would be able to generate synergies on sourcing and distribution due to its scale and pan-India presence.
“ITC’s past acquisitions in the FMCG space included Savlon, B Natural, Charmis and Nimyle have been a mixed bag. But we believe ITC can afford to be more acquisitive in the FMCG space, given its war chest of Rs 30,000 crore and distribution strength,” said Kotak Institutional Equities.
The company, Kotak said, is in a sweet spot to capitalise on opportunities to acquire niche brands that the current crisis may offer. Motilal Oswal has a neutral rating with a target of Rs 192. Kotak has a fair value of Rs 255 on the stock.
The shares of the company closed 2.76 per cent higher at Rs 191.50 on BSE.
Source: Economic Times