Following the media reports of Tata Consumer Products Ltd's tentative plans to acquire Bisleri, Nuvama Wealth Management said that if the Tata Group company successfully completes the transaction, it can look at expanding Bisleri beyond water given its capabilities.
According to a report by The Economic Times, Tata Consumer Products is planning to buy Bisleri for an estimated ₹6,000-7,000 crore. The report added the current management will continue for two years as part of the deal.
The news of stake sale talks was later confirmed by Chairman of Bisleri International, Ramesh J Chauhan, in an interview with CNBC-TV18. "We are in discussions with Tatas, other players are there in the fray, but cannot share. We would like to hold on to some stake," Chauhan told the news channel.
The stock of Tata Consumer Products closed 0.49 percent lower at ₹788.75 per share on the BSE today.
Nuvama Wealth Management, formerly known as Edelweiss Securities, likes the company's strategy of undertaking niche acquisitions. It believes that the acquisition can elevate the company's business as it has the expertise and capabilities as well as distribution heft.
Tata Consumer has brands such Tata Copper Plus Water and Tata Gluco+ in the hydration segment, as well as Himalayan, a presence in the luxury end of the bottled mineral water market.
"The company will become the dominant player in branded part of the market. Overall, we believe Bisleri can potentially boost Tata Consumer's hydration portfolio. The company continues to be one of the most agile companies in driving inorganic growth," said the brokerage.
As per the report, in FY22, for the first time Himalayan turned profitable, which indicates superior execution, according to the brokerage house.
"Bisleri is likely to turn in revenue/PAT of 25 billion rupees/2.2 billion rupees in FY23E. Yet, if Tata Consumer acquires it only via debt, interest cost may dent profits from Bisleri," added Nuvama Wealth.
As the company keeps driving development through portfolio improvements, distribution growth, inorganic acquisitions, and ventures into new markets, the brokerage has maintained ‘buy’ rating for the stock with a ₹880 target price.
“We continue to be optimistic about the company's development prospects in light of the company's strong growth drivers in both organic and inorganic channels,” it added.
According to Mintgenie poll, 24 analysts recommend ‘buy’ rating for the stock.
