ITC share price surges 5%; here’s why investors think Sunrise Foods acquisition is a major win for FMCG giant

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Published: May 26, 2020 11:41 AM

ITC share price shot up 4% on Tuesday morning as investors reacted to the purchase of Sunrise Foods Private Limited by the FMCG major.

ITC, ITC Sunrise Foods deal, ITC Sunrise dealITC announced on Sunday that the company has entered into a Share Purchase Agreement with Sunrise Foods Private Limited to acquire 100% of the equity share capital.

ITC share price shot up 4% on Tuesday morning as investors reacted to the purchase of Sunrise Foods Private Limited by the FMCG major. ITC announced on Sunday that the company has entered into a Share Purchase Agreement with Sunrise Foods Private Limited to acquire 100% of the equity share capital of the latter. ITC shares were trading at Rs 193.7 per share, up from its closing of Rs 186 apiece on Friday. The deal is however, subject to fulfillment of various terms and conditions. With this analysts expect ITC to augment its foods portfolio and in the spices segment. The purchase price has not been disclosed. 

“Sunrise is a clear market leader in eastern India in the fast-growing Spices category with a rich heritage and brand legacy of over 70 years,” ITC said in a press release. ITC — that controls a whopping 75% of the country’s cigarette sales — said that the acquisition is aligned with ITC’s strategy to rapidly scale up its FMCG Businesses in a profitable manner, leveraging its institutional strengths viz. deep consumer insight, a deep and wide distribution network, agri-commodity sourcing expertise, cuisine knowledge, strong rural linkages and packaging know-how. ITC already has its own range of spices under the brand name Ashirvaad.

Brokerage and research firm Kotak Securities has estimated the value of the deal to be close to Rs 20 billion (Rs 2,000 crore). ITC would disclose purchase price on completion of transaction, which is contingent on the fulfillment of conditions of SPA. “The domestic spices market in India is pegged at Rs750-800 billion, of which the organized/ branded market is about Rs150 billion,” Kotak Securities said. The branded market, according to Kotak Securities is growing with increase in consumption and shift to branded spices. “The top-10 players account for about 50% of the organized market. Everest, MDH and Eastern are prominent national brands whereas Aachi, Sakthi, Goldiee, Catch and Sunrise are strong regional brands,” it said. The deal could help ITC’s spices segment grow in double digits.

ITC shares on the BSE tanked over 38% since the year began till March 16. The stock has since then staged a recovery, jumping 28% from the middle of March till date. Benchmark indices Sensex and Nifty were trading in the green on Tuesday, gaining 1% each. S&P BSE Sensex was trading close to the 31,000 mark while Nifty50 was just below the 9,100 mark.

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