Marico acquires majority in a healthy food start-up. For key details you can make your own guesses.

Marico has acquired 53.98% of HW Wellness Solutions Private Limited, that operates under the brand name “True Elements” (TE).

Key points to note –

  • TE operating for last 5-6 years sells products in the healthy breakfast and snack segment.
  • It offers 70+ products including oats, quinoa, muesli, granola, flakes, poha, upma, dosa, roasted seeds, seed mixes, raw seeds etc.
  • Along with it’s own website, the brand is available across 90+ online platforms & 12,000+ retail outlets. Currently most of it’s revenues are claimed to be coming from the online platforms (proportion not disclosed) and Company plans to ramp up it’s offline presence going forward (guess that’s where Marico’s distribution strength comes into play).
  • It’s reported revenues for the last 3 years are –
    • FY 20 – Rs 16.5 cr
    • FY 21 – Rs 36.3 cr
    • FY 22 – Rs 54.3 cr
  • Profitability numbers are not disclosed
  • 53.98% stake acquisition is disclosed to be paid entirely in cash and is a combination of primary and secondary stake purchase. No further details are provided – neither total consideration nor the break-up between primary and secondary.

Marico is a Rs 70,000 crore market cap company with annual revenues of approx Rs 10,000 crore. Therefore, as such the subject transaction is immaterial at this stage.

However, what I really wonder is the purpose of such half baked announcements.

My personal belief is that if a company is listed, and that too someone like Marico, it should make extra efforts towards transparency.

Not disclosing key details like consideration amount, profitability etc due to some self imposed confidentiality clauses is not acceptable.

Large investors with contacts may still get this information somehow. What about the minority shareholders?

Let’s do some guesswork – 

TE prior to this acquisition had raised about $3.7 mn from private investors including RP-Sanjiv Goenka Group and SIDBI Venture Capital.

The last funding round of $ 0.5 mn was recently in Jan 2022 at a valuation of $40.5 mn. On FY 22 reported numbers, that means a sales multiple of about 6x that seems to be ok.

My guess, given the value that Marico brings to the table and the current challenging funding environment, the subject deal might have happened at a lower valuation.

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