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Reliance Consumer Products Ltd. will acquire 51% stake in Lotus Chocolate Co., increasing competition with the likes of Nestle India Ltd. and ITC Ltd.
The fast-moving consumer goods arm of Reliance Retail Ventures Ltd. will acquire 65,48,935 shares from Prakash P Pai, Ananth P Pai and other members of the promoter group of the listed chocolate firm at Rs 113 apiece, aggregating up to Rs 74 crore, according to its statement.
As part of the deal, Reliance Consumer and certain promoter group entities of Lotus will subscribe to 5,07,93,200 non-cumulative redeemable preference shares of face value of Rs 10 each at par.
The redemption of these shares would be at the end of 20 years from the date of allotment, and it would bear a dividend rate of 0.01% per annum on the face value.
The transaction triggered an obligation on Reliance Consumer to make an open offer to the public shareholders of the confectionery maker to acquire an additional 26% stake.
The capital infused by Reliance Consumer will be used to fund capital expenditure, working capital requirements as well as general corporate purposes, Lotus Chocolate said in the exchange filing.
In a separate statement, Reliance Consumer said that the fund will help drive expansion of Lotus “into a comprehensive confectionery, cocoa, chocolate derivatives and related products manufacturer” across industrial and consumer market spectrum backed by state-of-the-art manufacturing.
“The investment in Lotus underlines our commitment to further boost indigenously developed daily use high quality products, to serve a broad customer spectrum at affordable prices,” Isha Ambani, executive director of Reliance Retail Ventures, was quoted as saying in the release.
“We look forward to working with the highly experienced management team of Lotus as we further expand the business and drive its next growth phase.”
Lotus Chocolate has posted a loss of Rs 49.04 lakh in the quarter ended September, as against a net profit of Rs 1.5 crore a year ago. Its revenue from operations plunged to Rs 14.6 crore from 20.95 crore in the second quarter of FY22.
The 30-year-old Hyderabad-based company has six consumers brands under its portfolio: Chuckles, Super Carr, On & On, Kajoos, Milky Punch and Tango.
Asia’s second richest man Mukesh Ambani is steadily buying a portfolio of staples-to-soap brands to disrupt the country’s $110 billion fast-moving consumer goods industry, dominated by the likes of Hindustan Unilever Ltd., ITC, Nestle India, and Britannia Industries Ltd., among others.
Recently, it has also launched its own brand ‘Independence’ in Gujarat and is confident that its chain of 2,460 grocery stores and the Jio Mart app will act as platforms to push its FMCG products. Reliance Retail reported a consolidated turnover of Rs 1.99 lakh crore as on March 31, 2022.
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