Nuvama Institutional Equities said if Bisleri acquisition goes through, it will be a right fit at right price for Tata Consumer Products (TCPL). Nuvama estimated Bisleri’ s FY23 revenues at Rs 2,500 crore and profit after tax at Rs 220 crore. Bisleri acquisition can potentially add 18 per cent to both revenue and profits for TCPL, excluding interest cost, the brokerage said.
If TCPL acquires Bisleri only via debt, interest cost may dent profits from the bottled water maker, it added.
Tata Consumer, Numava said, will get a larger and mass play with Bisleri, as it already has a presence at the premium-end under Himalayan and also has brands such as Tata Copper Plus Water and Tata Gluco+ in the hydration segment.
The domestic brokerage said it likes TCPL's strategy of bolt-on and niche acquisitions such as Soulfull, whose distribution has been scaled up by 10 times by the Tata group companies. It felt the Tata group firm can potentially look at further scaling up business, especially in fizzy drinks.
Overall, "If TCPL acquires Bisleri, it can ramp up the brand/business due to its expertise and capabilities as well as distribution heft. TCPL will become the dominant player in branded part of the market. Overall, we believe Bisleri can potentially boost TCPL’s hydration portfolio. TCPL continues to be one of the most agile companies in driving inorganic growth," the brokerage said.
Nuvama said Tata Consumer can potentially look at scaling up Bisleri beyond water and further scale up given its capabilities. It noted that FY22 was the first time when Himalayan turned profitable, "which clearly shows its superior execution." The current management is likely to continue for two years as part of the deal, which will lead to seamless transfer.
Tata group, meanwhile, has clarified that it keeps evaluating opportunities and , is in discussions with various parties, including Bisleri, and will make appropriate announcements as and when needed.
"We continue to maintain a ‘BUY’ on TCPL with a target price of Rs 880," it said.
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