Ladies and gentlemen, good day, and welcome to the Tata Consumer Products conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jay Doshi from Kotak Institutional Equities. Thank you, and over to you, Mr. Doshi. Thanks, Ziko. Good afternoon, everyone. On behalf of Kotak Institutional Equities, I welcome you all to the conference call of Tata Consumer Products to discuss acquisitions of Capital Foods and Organic India. We are very pleased to host the senior management team. We have with us Mr. Sunil D'Souza, Managing Director and CEO, Mr. L. Krishnakumar, Senior Advisor, Mr. Ashish Goenka, Group CFO, Mr. Ajit Krishnakumar, Executive Director and COO, and Miss Nidhi Verma, Head, Investor Relations and Corporate Communications. I'll now hand over the call to Nidhi. Over to you, Nidhi. Thank you. Thanks. Thanks, Jay, for hosting us, and welcome everybody to the call. As you all know, we have announced the acquisitions of two businesses on Friday, and we uploaded the presentation along with detailed materials. For today's call, as we normally do, Sunil will walk you through the key slides for about 15-20 minutes, and then we will straightaway get into the Q&A. So yeah, over to you, Sunil. Thanks. Thanks, Nidhi. So if you go to the next slide number 6, I think. So I think, I'll probably skip this slide because I think everyone knows what Tata Consumer is. If you go to the next slide. Yeah, so over the past three years, we've invested significantly in building a strong foundation to drive accelerated growth. We've built a strong, I would like to think, a strong distribution system with 1.5 million outlets, which we touch directly, which is up 3x from where we started. And, our numeric reach is now 3.8 million, which is 1.5x where we started. We've invested in infrastructure. We've got close to 10,000 distributors and sub-distributors. We've got about 5,000 people on street across 43 C&FAs. We built our capability in alternate channels, which to us are the channels of the future, from a 19% contribution in FY 2021, we are 27%, and we've significantly strengthened our digital capabilities, Cloud, SAP, Single Instance, strong S&D systems, IBP, and analytics. We've always maintained that we have six clear pillars for our strategy, strengthening and accelerating our core, driving digital and innovation, which is what makes us future fit, unlocking synergies and driving costs down, building capabilities and competencies and a future-ready organization, exploring organic and inorganic opportunities while embedding sustainability. Now, the reason why we are here today is because under the exploring new opportunities, we've always said we will grow organically as well as inorganically. Inorganically, we will—we have a very clear roadmap of what we're looking for, and when we find value, we will look at doing inorganic options. Here we are, having announced two acquisitions on the same day. Two acquisitions, Capital Foods and Organic India, both different businesses. Capital Foods has two big brands, Ching's Secret and Smith & Jones. Ching's Secret is synonymous with Desi Chinese, with a Pan-India appeal. Smith & Jones is a Western brand, Western position brand, playing again in different spices, paste, et cetera. Both cater to fast-growing in-home consumption of non-Indian cuisines. In fact, if you look at it, if you look at a Pan-Indian cuisine, Ching's Secret is probably right up there. This is, it fits in perfectly with the pillars that we identified for our portfolio, where we said core pantry, ready-to-drink beverages, breakfast, mini meals, snacking, and future opportunities. So, Ching's Secret fits in perfectly into our pantry platform and a little bit into mini meals and snacking, with gross margins, which are significantly accretive to our current margins. Organic India, on the other hand, is a leading better for you brand with, I mean, rooted in organic. We've got an opportunity to become a formidable player in herbal infusions. Currently, about 40% of their business is infusions, 40% is supplements. Supplements largely sold outside India, but we've got an opportunity to grow them within India itself, and expands our total addressable market into fast-growing and high gross margin categories. This gross margin is still higher at 55%, and more importantly, it gets us into health and wellness and nutrition categories. The big, big short-term potential here is for both the brands, and I'll come to that, is to leverage our network and drive significant operating efficiencies. I talked about this. If you look at first the slides, the points which are marked in reddish color. So Capital Foods fits in perfectly into the pantry platform with sauces, chutneys, noodles, Chinese masalas, pasta masala, ginger garlic paste, and a little bit into mini meals and snacking with soups and instant noodles. Organic India fits in perfectly. We've always said we want to premiumize our tea business, so we get tea and infusions. It's not only tea. We also get organic packaged food, albeit it's a little bit small right now, but we still get a platform. We have herbal supplements in our horizon three pillar. What it does to Tata Consumer is it turbocharges our progress towards becoming a premium food and beverage platform. Today, we have market-leading food and beverage brands. We've got strong S&D, and we are continuing to expand that. We've delivered and will continue to deliver steady growth over the mid- to long-term, a mid-teens EBITDA, and a strong innovation. Right now, we have come from 0.8%-5.5% innovation to sales with strong R&D facilities. Going forward with these brands, we now have offerings across the entire gamut of cuisines for the Indian consumer, from Sampann, which is Indian, to Smith & Jones, which is Western, to Ching's Secret, which is right now Desi Chinese, but opportunity to make it into an Asian/Oriental brand, and with Organic India, strong better-for-you products. Superior double-digit growth. These are, these are categories which are growing 15%-20%, very strong brands. Once we provide fuel with our distribution, et cetera, we expect to accelerate the top line momentum, while, as I mentioned, their gross margins are significantly accretive. Therefore, there is significant scope for us in our consolidated P&Ls to drive improve gross and EBITDA margins. More importantly, as I mentioned, these are very, very strong brands that can provide umbrellas to get into more innovative and emerging product categories. So a bit about Capital Foods. Capital Foods, as I mentioned, it is two strong brand, Ching's, which is primarily Desi Chinese, and Smith & Jones, which is primarily Western. Ching's is the leader in Desi Chinese across categories. They actually created the Schezwan Chutney market, and Smith & Jones is the number one in ginger garlic paste. Unique products for in-home consumption, gross margins of close to INR 936 crore, net INR 750 crore, and there's a reason I'm talking about it, and I'll elaborate it as we go further. Gross margins 50% and EBITDA margins 20%+ on an ongoing basis. There is a little bit of upheaval in the past two years as they went through some changes in organization structure, team, et cetera. But on an ongoing basis, standalone, they, we do expect them to have a 20%+ EBITDA margin. I talked about the fast-growing categories that they are in. They've delivered a 20% CAGR in net revenue over the past three years, continuing to improve EBITDA margins. And more importantly, their back end, they've got seven plants, three owned, four co-pack, with ability to scale. Utilization is still not ideally where it should be, and therefore, we have an opportunity to utilize this capacity as we scale the business. Very, very strongly connected to ethnic Indian retailers globally. In fact, also creating white labels for them, and 17% of their revenue comes from exports. I do think this can grow significantly. The most important thing is they have only 350,000 outlets. Just as a perspective, I have—I directly touch 1.5 million. My numeric reach is 3.8 million, 3.9 million, and therefore, the ability to scale in the short term through distribution. They have number one, number two positions across at least five segments: Schezwan chutneys, blended masalas, sauces, ginger garlic paste, and soups. They've got a very strong brand recall. If you look at awareness of 88, consideration 84, ever use 79. I mean, these are—this, this is an epitome of a strong brand, if I look at it. On the right-hand top, I talked about the incremental GT unlock. We have ability to, I mean, ideally, in an ideal world, if I get to all my outlets, it's 10x. If you look at the box below, e-com, they are very, very weak right now, and I can, I built a strong e-com platform. About 9%+ of my revenue comes from e-com. We've got a strong team, which can help scale this up very quickly. Modern trade, I think they are decent. We are good, so I think, we can take modern trade also to the next level. Basically, we've got a long runway for growth. If you look at it, the Chinese food service market is expected to grow at 12%-14%, given the strong consumer preferences. Whether you look at the ratio of in-home to Mexican in organized food service industry, especially in the U.S., and if you compare it to the equivalent of what we have here in Desi Chinese, that's 30, this is three. So there is a long runway for growth, and we do expect that Ching's will continue to have a very, very strong runway as we go forward. Currently, our estimate is the Desi Chinese segment is expected to grow at about 24% CAGR. And that 24% CAGR provides us enormous opportunities. We expect our relevant market to grow at a 13% CAGR. Across all the segments, you look at anywhere from 14% to 40% growth across the segments that they operate, so overall, 24%. And most importantly, this high growth also comes coupled with high margin, 50%+, which is, I would think, quite up there in the food and beverage segments. Apart from that, I talked about Capital Foods having very, very strong connects with global retailers. You see the red dots. So whether it is Australia, UAE, or the U.S., U.S. especially, they've got a very strong connect with the big retailers out there. We've got a footprint in similar markets, and therefore, we do expect us to be leveraging their relationships and infrastructure as well, to make sure we explore our own brands like Sampann, Raasa, Joyfull, et cetera. In summary, this facilitates us into high growth, high margin categories, significant TAM of INR 21,000 crore+. They've grown at close to 20%. We can only accelerate from here on. This is in line with our strategic priority to expand into high margin, high growth categories. Strong brands, Ching's is synonymous with Desi Chinese, Smith & Jones. Strong brand, I think, can accelerate further. Consumer trends of growing in-home cooking of Western cuisine, Smith & Jones right on top of that. All the product categories that they bring in are completely accretive to our business. There are no overlaps, and they are margin accretive. I think this is an ideal combination if ever there was one. And of course, as we've always said, we would look for brands which have a strong India base, and if there is an export potential or an export leg, that is icing on the cake. Capital Foods gets in that for us. Organic India, very quickly, it is the leading better for you organic brand of food and beverage and herbal supplements. INR 7,000 crore + TAM in India, INR 75,000 crore globally, so overall, INR 82,000 crore. The big, big thing in this category is given, A, organic, and B, nutrition, customer trust is key to success. I think Organic India has built this over the past few years. They are present across channels. It's right now only INR 350 crore. There's a reason for that. They are present only in 24,000 outlets. They are focused on sustainable living, and more importantly, they've got a 55%+ gross margin. It's in line with our strategy for a Horizon three segment. Most importantly, and I would highlight this, we spent a lot of time on the supply chain and making sure, for want of a better word, I'll use kosher. They've got rigorous product testing procedures and certifications valid for global, major global markets. We've gone right from the back end to pulling products which they've already sold, testing them, making sure that when we put the Tata brand name on this, we are truly selling organic products. And therefore, I would say they've got a unique, robust, hard to replicate, and more importantly, scalable back end. Because they've got a direct connect with about 2,500 farmers, indirect with about 10,000+ farmers. So 12,500 farmers, 130 people working with those farmers. This is a supply chain which is hard to replicate. The other piece I would want to highlight is this is, sits at the ideal intersection of ancient Indian traditional medicine and organic. So there are players in Ayurveda, Indian medicine, there are players in organic, but there is no one who's built this bridge and occupied this strong position. As I said, 40% of their business comes from supplements, which are sparsely distributed in India. 40% of their business comes out of tea and infusions, and 20% from organic packaged food. Their teas are priced 15%-20% premium over Tetley, which is our most premium tea, and their gross margins are significantly accretive to our business. I talked about the strong supply chain, 130 people, 2,500 farmers direct and 12,000 farmers indirectly associated. They actually pioneered the commercial cultivation of Tulsi, with Organic India being the preferred buyer across this entire set of farmers. They've got certifications across the globe. And like I said, we spent a significant amount of our due diligence time into this particular aspect, because once we have this, then we can scale very quickly into other organic products as well. This provides a unique opportunity to strategically develop a high-growth, high-margin health and wellness platform for Tata Consumer. The category in India is growing at 11%, category globally is growing at 8%, but it is a huge, huge category. Organic India effectively operates in fragmented markets, but high growth markets, has strong consumer trust. It is diversified geographically. About 50% of their business comes out of India, 50% comes from the U.S. The good part is we think we can grow the India business as well as the international business for a simple reason. India, they are only in 24,000 outlets, and I, I would repeat, I am present directly in 1.5 million in total numeric reach of 3.8 million. Out of their business, which comes 50%, which comes internationally, 40 out of that 50 comes from the US, and that too, primarily from three big retailers, which is Whole Foods, Sprouts, and the Natural Grocers. They are sparsely distributed in Canada. They don't have a distributor in the U.K. So you can imagine with my footprint in Canada, U.K., Europe, Australia, South Africa, we've got a long, long runway, even in the international space for this business. I talked about the 24,000 outlets. They are almost negligible in modern trade. While you see a 22% contribution from e-commerce, I would just point out to the fact that it, this is 22% of INR 350 crore. My online business is close to 1,000 crore, so we have the ability to propel this far, far more, and of course, I talked about exports. Most important in India, we've got some products which appeal to the pharma channel, but we never had the heft or the scale to build a dedicated go-to-market. So like Tata GoFit, Soulfull, Tetley, these do sell in the pharma channel, but now with the Organic India infusions and, more importantly, the supplements coming in, we will now focus on building a full go-to-market to address the pharma opportunity in India. In summary, high growth, high margin, wellness platform with a leading better-for-you organic brand. In line with our strategy to expand TAM in expanding into adjacencies. It's got a robust, sourcing and scalable backend infrastructure for organic products, and very, very, very strong farmer connect and lot of goodwill where they operate in. Unparalleled end-to-end certifications, across the supply chain with high consumer trust, customer trust. I would just like to highlight, I mean, if you've got to have number one at the top, be in the top three positions in a Whole Foods or a Sprouts, you've got to have top-notch products, and top-notch consumer loyalty. Product categories, completely complementary. Tea and infusions, completely premium to us. The Horizon Three supplements, completely accretive to us, both of them being margin accretive. I did talk about a strong India business, but ability to leverage it globally as well. Talking about synergies, basically top line and cost synergies. In terms of top line, obviously, huge runway for expanding the GT footprint. We've got a strong e-commerce team which can drive growth in that channel and continue to drive high double-digit growth in modern trade, and of course, enhance our export footprint. In terms of cost, because of their subscale nature, they used to pay higher trade margins. I think, immediately we see an opportunity to optimize that. Selling expenses, again, because of difference of scale, their selling expenses across, whether it is variable or fixed, are significantly higher than what we have. We see an opportunity to optimize there. Middle of the P&L, the fixed costs, whether it is legal, finance, logistics, distribution, once they start leveraging our costs, we've got enough slack in the system to accommodate them as well. We'll see a opportunity there. And of course, capacity utilization on the back end, whether it is optimizing between our facilities and Capital Foods' facilities or by growing Organic India, leveraging the back end, I think there is opportunity to drive capacity utilization higher in both the acquisitions. In terms of the financial transaction overview, I'll just request LK to walk you through it. Okay, yeah. Good afternoon, everyone. Just walk you through Capital first and then, maybe comment on Organic. In the case of Capital Foods, we are gonna acquire 75% upfront, and 25% will be acquired over a period of, three years. Idea is to have full operating control. The minority shareholding, which will be partly with Ajay, the promoter, and partly with, Invus, which is one of the existing, private equity investors. We will have full flexibility to manage and integrate the business. They will have certain protective rights, so it's not a joint venture, it's a majority, controlled and will be consolidated as such. The upfront purchase of 75% is at the enterprise value of INR 5,100 crore. It translates to a multiple of over 6% based on FY 2024 net sales. Having said that, Sunil talked about the distribution and where it is in terms of reach and the growth potential. So if you just want to look at a number, one year forward, I think it will be a very reasonable number. In terms of margins, also, this business has strong gross margin. In terms of gross margin profile, it will be accretive, and EBITDA margin will be in excess of 20%. Moving on to Organic India, we intend to purchase about 100%. There is a small earn-out, which is capped, which is linked to future financial performance. The enterprise value is INR 1,900, and the multiple is lower at 5x. Even here, there is good growth potential. Having said that part of the business is in overseas markets, I think 40%-45%, so growth rate for that will be a little lower. Having said that, the addressable market outside India for health supplements and nutraceuticals is fairly large. So the market opportunity is large, and we will have a growth rate as we expand distribution, build new products, but it's going to take a little longer than just ramping up distribution as we would do in the case of Capital Foods. The impact on financials, to some extent, depends on the financing plan, which will be approved by the board later this week. When we are saying that there is an EPS break even and cash EPS accretive, we have made some assumption on a mix of funding, which includes some equity funding. The board will approve, and we will communicate the actual funding plan towards the end of this week. We expect the closing to be done in quarter four of this financial year, and we've already started working on the operational integration. Yeah, I think that's it. We can get into the Q&A now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama. Please go ahead. Yeah, thanks, and, congrats on both the acquisition. My first question is on Organic India, and there are three subparts to this. One is on your international business. Bulk of the international, essentially 80%, comes from U.S. So wanted to understand, what is the reason for, less success in Europe, Canada, Australia, and is the industry for, this kind of a product also having 80% salience to U.S.? So that is one, subpart. Second is for supplement, you said largely it is outside India. So wanted to understand here, what is the issue, and what will be the plan here? Would you focus much more given, your current, business also, bulk of it comes from India. And third subpart will be on the broader organic, positioning. Currently in India, certification, laws and regulations are not very strict. When do you see, Tata focusing on in terms of the organic packaged food, which is currently 20%, when do you see, Tata's focusing much more? Because that, I think, is also linked to the certification regulation in India becoming stricter. So that is the first question. Abneesh, thanks. Let me answer the first one, right? 50% of their business is from international markets, and 40 out of that 50 comes out of the U.S. Let me say it's probably more by default rather than design. The original founders, one of them was from the U.S., and therefore, the focus on the U.S. market, that's number one. Number two, a lot of the expertise which they drew, in terms of the supplements, et cetera, were from experts based out of the U.S. Therefore, they put up a sales team and a team out there. It's about 17-18 people right now, who are based out of Boulder, Colorado, and working out of there, and therefore, they've got the listing into the three big chains in the U.S. They export to about 48 odd countries per se, but let me say there is enormous opportunity to get proper distributors, proper expansion, proper listing into outlets, and therefore expand it into Europe, Canada, U.K., Australia, everywhere. And that is the opportunity that we see. It's not that they've restricted themselves to the U.S. or they have not got an opportunity elsewhere. It is just that they focus. Given their size, scale, and ambitions at that point of time, they only focused on the U.S. So that's number one. Number two, you're right about the market internationally being higher. It's INR 75,000 crore. India is about INR 7,000 crore. But INR 7,000 crore is also a decent market for us to go after, especially given the fact that, as I mentioned, these guys play at the sweet spot of traditional Indian medicine and organic. And once the Tata name comes into play in a place like Organic, there is the trust component, which will play up. We've got a distribution to ramp up. Modern Trade, you saw 3% contribution. I mean, in Modern Trade itself, there is an opportunity to ramp it up. So we do see substantial opportunity to grow in India as well. You're right, the market size is bigger internationally, and therefore, I would say both parts will grow significantly. To your last point, I think, I will point out to the presentation, the slides, on certifications. See, they are certified globally, and from earlier, they used to do about 180 tests. After we had discussions with them, saying, "You've got to be certified across the globe," now they do about 500+ tests, so they would pass organic certification anywhere in the world. And I do believe anywhere in the world means definitely in India, and this is across all product categories. So I would be very happy for FSSAI to ramp up organic certification, because if anything, it leaves me at the high end of the pedestal. Sure. My second and last question is on Capital Foods. So when I see distribution, you did speak on the huge scale up opportunity, but wanted to check, you've already done the Soulfull integration. So when I see the numbers of Capital Foods versus Tata's current distribution, there is, say, almost 1:4 difference versus the direct, and 1:10 versus the total. But seeing the success of Soulfull, my question is, in three years, can this 350,000 current distribution become say at least your direct distribution, which is there currently, which is say 1,500,000? Is that possible, because Indian Chinese, does it reach to that 15 million direct, would you know that number? Plus, how easy, going by the Soulfull, is it to target the existing direct distribution in terms of the scale up? Abneesh, I'm not a forecaster of the future, but just to give you some past numbers, Soulfull, when we took it up, it was 15,000 outlets. I think in three years we've got to about 300,000 outlets, right? Number one. Number two, the categories that they sell would be available in almost all Kirana outlets. Desi Chinese is our definition. Remember, they've also got Smith & Jones, ginger garlic paste, pasta masalas. They've got soups, instant noodles. So definitely, I would say the opportunity to enter into every single of my total direct, and probably a large percentage of my numeric opportunity does exist. The focus now will be to make sure that we integrate these businesses quickly, provide the extra bandwidth that is required at the front end to drive that distribution into outlets, and in an ideal world, I would like to do it as fast as possible. Sure, that's all from my side. Thanks a lot. Thank you. Our next question is from the line of Mihir Shah from Nomura. Please go ahead. Hi, sir. Thank you for taking my question, and congrats on good acquisitions. So my first question is on Ching's- Mr. Mihir, sorry to interrupt you. May we request you to use your handset, so you're not audible clearly, sir? Is this any better? Yes, sir. Please go ahead. Okay. Apologies for that, and congrats on the good acquisitions. So my first question is on Ching's. Can you share the growth rate level that one can envisage in Ching's? You did mention that the focus categories, you know, can grow at about 24%. Historically, we've not seen that kind of growth. Can one grow at a higher growth rate than the category over the medium term? So that's question one. And a subpart to it also, if you can share the revenue breakdown of Ching's portfolio into sauces and noodles, will it be more skewed towards sauces and less towards noodles? So, so, Mihir, in the last three years, the CAGR of Capital Foods has been 20%. We do expect the categories that they operate in to grow at a 24% CAGR going forward. And, remembering the fact that they already have very strong position, they should be able to ride category growth. If anything, we should be able to equal, if not outpace, given the distribution strength that we have. And therefore, we remain extremely bullish about strong double-digit growth as we go forward on Capital Foods. And I would just like to highlight the fact that it is not only top line. Remember, it is significantly accretive to my gross margin. So as we grow that faster than the rest of my portfolio, my margin profile starts to change faster than that. So that's number one. 2, I think they've got a decent mix of, saying about 77% of their turnover comes out of Ching's, 17% comes out of Smith & Jones, and about 6%-7% comes out of all their other categories. Got it, sir. Thank you. Sir, on Ching's again, on margins, one would ideally assume that the brand would have remained underinvested, as you know, they were thinking about selling out, et cetera, and it would require higher investment once it comes under Tata Consumer. How much of cost synergies can be extracted, and in which line items can we see that? And after the cost synergies, do you still expect, you know, one—I believe that you expect EBITDA margin to be higher than 20+%? So what can be the sustainable margin profile? I did hear you on media talking it to be upwards of 25%, but maybe a little more color on that will be very helpful. So, so Mihir, actually, if I look at the synergy lines, and this is true both for organic and, capital, anywhere from 200 to 400 basis points comes out straight on the trade margin piece itself, right? That's number one as we combine. Number two, the entire center of 55% gross margin translating to 20% EBITDA. So you can imagine the cost line item sitting there. So there is a significant percentage which will come out in fixed and variable costs in the middle of the P&L. That's number one. Number two... And therefore, we remain confident of delivering a 20%+ EBITDA, going forward. In terms of brand investments, That is one area I think they have not, shied away from. In fact, one of the reasons why they built what they built is because of the investments behind media and consumer connect. Let me say their A&P spends are at least 2x-2.5x of what we spend, while the percentages might come down as they grow significantly, in absolute terms, we would continue to increase the A&P spends behind the brand. Understood. Thank you. So my second question is on Organic India. You know, if you can, you know, talk about your plans to scale up Organic India, apart from the, you know, the clear leveraging of your distribution reach that can, that will play out. Maybe some color on what category expansions that one can expect out of Organic India and the kind of growth numbers that one should think about in this business. So, Mihir, we've got already very, very specific plans on both Capital Foods and Organic India to leverage our distribution while making sure that both of these brands get focused. Just as a perspective, right now, the intent is that in all 1 million+ outlets, what we had started six months back of doing a split route, one broadly for one for food and one for beverage, we will be adding a third route out to all 1 million+ cities. And then going one step below, 500,000+, where we had one route operating, we are now going to split it into two. So that bandwidth, again, is going to double. With that, at least in the big places which matter in the short term, I think we will get to distribution very quickly. On the product categories itself, I think this is work for us to do. We see an opportunity, given the brand name, Organic India, given their supply chain and this connect with these farmers and their agri team to boot, and more importantly, their immense amount of knowledge sitting within their system, we do think we can expand into many other categories, but that is a map yet to be drawn up from our side in detail. Got it, sir. So one last question to, you know, LKK. I mean, on the accounting or the acquisition, if you can kindly share, you know, how much one should think about what will sit in goodwill and how much on intangibles, and if there is any tax benefit on depreciation charge on intangibles that can be availed. So yeah, that's my last question. I'll just give you... We are still working through the purchase price allocation. You know, part will be in goodwill, and part will be in intangibles. The proportion, as we finalize, we will let you know. On the intangibles, given that the brand, especially in the case of Capital Foods, fairly strong, there'll be a reasonable attribution to the brands. And we will, unlike the other brands, look to amortize. That is the thinking. So over a period of time, you can expect some amortization. The proportion, as we finalize the purchase price allocation, you know. Organic is similar situation. Maybe the proportion attribution intangibles will be slightly lower than in the case of Ching's. Now, the other point that you need to remember is from a tax perspective, you know, we will certainly look to claim deductions because based on the decisions that you're probably aware. We have not factored in any upside on tax at this point in time in our return calculations. But yes, I think these are deductions that we will certainly seek to get. Got it. Thank you very much, and all the best, sir. Thank you. Our next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Yeah, thank you for taking my questions, and congratulations on the two acquisitions. So my first question was, you know, you, Sunil, you talked about the salience of online channel for Organic India, I think about 22%. I just wanted to understand, what is the salience for, Ching's on the online side? And just for Organic India's category, you think that, it will be more prevalent on the online side or offline side, even going ahead? Because, you know, this category in general is very nascent in India. So, Sheela, first of all, I mean, Capital Foods, I think the e-com contribution is 4%. You're right about Organic India being 22%. I think the 22% is again, by default, not by design, primarily because the products are not widely available in the offline market, and therefore, consumers go online. At least when the initial proposals had come up and we had gone to check with consumers, and did a dipstick of what they think about their brands, the feedback that we've got was great brands, but not available. I either need to go to a Fabindia store or a very few places, pockets, like in Gurgaon or Bangalore, et cetera, in some pockets it was available. Therefore, consumers bought it online. But that said, there is no reason why as we ramp up, we will definitely ramp up offline distribution. There's no reason why online shouldn't continue to grow at a significant clip. Capital Foods, the focus always had been offline and the Kirana stores, LUPs, expansion of distribution, et cetera. Therefore, I think there was that much less focus on driving online. Here, I think in Capital Foods, we will bring our muscle to bear. Just as a perspective, in my business, about 9%+ of my contribution comes from e-com. There's no reason why Capital Foods also shouldn't be in that range, if not higher. Understood. The second question was: Do we see any rebranding opportunities for either of the brands, you know, under the Tata Sampann umbrella or in any way, or do we want to pursue the same branding which these, you know, these two companies have? So, so Sheela, let me, let me say very clearly, we've bought these brands for what they have built, apart from the institutional knowledge, supply chains, networks, and the people that they have. There is no reason for us to go and dismantle that overnight. What will happen, though, is we will go back to consumers and see what happens if we add Tata to it in one form or the other. This is a similar thing that we've done in Soulfull, where we had got very clear feedback that apart from the two geographies, say two or three geographies, where Soulfull was distributed decently and consumers knew about it, rest of the places, adding the Tata brand name did wonders to the trial generation among consumers, and that's why we went with Tata Soulfull. But as a perspective, Himalayan is Himalayan, right? So we've not added the Tata name there. So there is no, I would say, ideology or compulsion to add the Tata name, but if it does add value, in one form or the other, we will consider it. Understood. My final question: you know, in the presentation you talked about, you know, the premium construct or, you know, we heading to becoming a premium FMB play. So from where we are right now, especially looking at the emerging businesses, what would be our premium construct now, and what would this change to once we have these brands under our umbrella, and where do you see that, say, in the next three to five years? So, Sheela, like I said, both these businesses, gross margins are significantly accretive to my business, number one. Number two, their growth rates are far more, I mean, faster than my current business. So as a percentage of mix, this will continue to grow. What we do expect, today, growth businesses for us contribute to 20% of our portfolio, and by addition of these businesses, my growth businesses will now be 30% of my portfolio, which will continue to grow at 30%. That's the expectation. Just to follow up here, Sunil, this would also include Tata Sampann, which has a highless component of being premium. So my question was more to do with, you know, how do we think of Tata Consumer being a premium play? I mean, that is where I was coming from. So, Sheila, it's not that we are, I mean, sacrificing all our current business and tomorrow becoming a whole premium play. This is the journey towards becoming a more premium F&B play. You see the mix of businesses with... Tata Sampann will grow, but remember, Soulfull is a significantly higher margin. NourishCo is a slightly accretive, equal, if not slightly accretive margin to my distinct. These are completely accretive to my margin. So overall, I would think it balances out. If not, if anything, starts adding to the incremental incrementality of Tata Consumer in margin terms. Understood. Thank you very much. Can I just request everyone to limit your questions to two, please? Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Thank you. Our next question is from the line of Santosh Kumar Kesari from Kesari Finance. Please go ahead. Hello, am I audible? Yes, sir. May we request you to use your handset, sir? Thank you. Yeah. Am I audible better now? Yes, sir. Please go ahead. So, Sunil, I had one question, and we are buying brands which are home grown and which have come up for almost a decade or so over the past one year before our very eyes. So, I just wondered that does Tata Consumer have also plans to develop its own brand in such a way that they become they catch the imagination of consumers and become a bigger brand in themselves? Because what I'm seeing is that over the past few years, we are spending capital, and maybe we'll go for a raising equity also and debt to fund this acquisition. This is like splurging a lot of money into brands, and maybe the innovation which is there in the company for developing a home-grown brand may not be, you know, getting so much attention of the management. Mr. Santosh, I would humbly beg to disagree with your assessment. Incidentally, Tata Consumer is not a brand. Tata Consumer is the name of the company, and we are in the business of building brands. Whether it is Tata Tea, and the various brands like Premium, Agni, Gold, which we have built, and the total tea business is INR 5,000 crore. Tata Salt is a brand by itself, which is close to INR 3,500 crore-INR 4,000 crore, or Himalayan, which is, I would say, the number one mineral water brand in the country, or Sampann, which has come from nowhere and is now on track to become a INR 1,000 crore brand, or Tata Copper Plus, which is close to INR 600 crore, INR 500 crore-INR 600 crore this year. I do think we're building brands. Organic brands do take time to build. Organic brands take time because you have to build physical availability as well as mental availability with consumers. Both these brands have been around for 25 years. They've built very strong brands. They've got very strong products. I think that the lag is a robust operating system and front-end distribution, if I may, and we do think we can create great value with this. Okay, makes sense, Sunil. Thank you. Thank you. Our next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, sir. I just wanted to understand why in FY 2021, Capital Foods had a 60% YoY growth. Was there some inorganic portion in this in FY 2021? Percy, Capital Foods, both in Capital Foods and Organic India, there is a little bit of noise in the past. There's some good noise, some bad noise. Capital Foods had a phenomenal run in the initial days of COVID, because remember, packaged food, in-home consumption, Western cuisines, Desi Chinese, did very well, and that was the reason why they had a super bump. But after that, they had some issues with the management teams, et cetera, and that's why they went through a little bit of upheaval. You would see now FY 2024 delivering, again, very strong growth, both on the top and bottom line. It was a similar story in Organic India, where they've gone through some upheavals, on organization, structure, people, et cetera, in the past. Now that they are stable, FY 2023, apart from that, FY 2023, they had a lot of cleanup to do, one-off cleanups because of these exact issues of the past, and that's why you'll see some noise in the bottom line numbers as well. Going forward, we do expect steady state. I mean, at least right now, they are steady state, very, very stable, both on the top line and bottom line. So, FY 2021, Capital Foods, it was the COVID-induced bump. Understood. Understood. And for Capital Foods, what percentage of sales comes from HoReCa? I would think today it is very, very small, Percy, and that is one of the opportunities. Given the pace, chutneys, noodles, coupled with the portfolio that we have of tea, coffee, et cetera, I think we've got a long, long runway in building out our food service. Currently, about 8%-9% of Capital Foods comes out of the HoReCa channel per se. Now, of course, when you say HoReCa, this is direct sales to HoReCa, because HoReCa also buys from Kirana stores, et cetera, when you're not available, right? So we don't have that number. But if I just stay for a minute with the 8% number, I do think it should be significantly higher. We started building our food service business about one and a half years back or so, once we acquired Tata SmartFoodz. Now, I think all of a sudden, the portfolio gathers heft, and therefore, we can accelerate that piece. Right. And lastly, if we exclude the one-offs, in the Organic India margins, what is the current run rate of the margins, excluding the one-offs, but before factoring in any synergies or any value that Tata might add to it? Percy, 55% gross margin. Now, you can imagine how much flow-through I will have on my EBITDA percentage, right? Right. Right. But, I mean, before you add value and get your synergies, what is the current EBITDA margin run rate? Any clarity on that? Currently, it's in high single digits, Percy. But like I said, they're just getting their house in order after doing a full cleanup. So therefore, they should be able to get to low double digits even without our interventions. And we do think there is significant amount of cost takeout to be done, and therefore, it will be accretive to our EBITDA margins. Okay, sir. That's all from me. Thanks and all the best. Thank you. Our next question is from the line of Vismaya Agarwal from Citi. Please go ahead. Hi, sir. Congratulations on the great acquisitions. Just one bit, if you could please share some more details on the Capital Foods portfolio in terms of any breakdown, in terms of sauces and noodles or any other large parts, and, you know, from a category perspective, which are these, which you see as the big growth driver for the company going ahead, please? So, Vismaya, actually, we see... Can you hear me? Yes, I can. Yeah, sorry, sorry. We had a technical issue in the room. So, in terms of opportunity, we see an opportunity—like I said, the entire portfolio is accretive to what I have. And therefore, we see significant opportunity to grow the entire portfolio. But if I were to give you headlines, right, the Schezwan chutney is the flagship at 21%. Sauces are about 20%, Chinese masalas, noodles, other masalas roughly 8%-10%, and the balance are in single-digit percentages. Got it, sir. This is helpful. Thank you. And then last one, you know, you've always maintained that M&A is a big sort of growth driver, from the medium-term perspective. Now that these material acquisitions have happened, will we be prudent to expect a slight pause in that strategy, or, you know, does it still remain one of those things where you'll look for M&As, or you'll continue to rather look for M&As, even in the near term? So Vismaya, let me say, the board has reposed enormous faith in the management team by agreeing to do two large-size acquisitions at the same time, and therefore, our ability to execute the same. So in this, I think the ball is in our court. In the short term, at least, I think the focus will be to make sure we integrate these businesses, and start delivering growth against this and get the engine humming. We've always maintained we want to be a large FMCG company with first focus on food and beverage. We look at organic and inorganic opportunities. That narrative doesn't change. We've just got to make sure that while we are doing either organic or, more importantly, when we do inorganic pieces, we deliver the business cases and then look at new opportunities. We're not timing anything per se, but once we are sure that we've got these pieces right, there's no reason we won't keep our eyes out for the next opportunity which comes along. But just as a perspective, we've... Other piece we've always maintained is we will create value, and there is no time limit or a target number that we'll go after. So if you see, this happened after two years. So, the last one we did was Smart Foodz. So it was almost two years. It's not that we, we didn't have opportunities there, but we passed all of them because we didn't think they were strategically and financially good fits. When we see something happening, there is no reason we won't, press the trigger. Very clear, sir. Thank you. That's all from me. Thank you. Next question is from the line of Amit Purohit from Elara. Please go ahead. Yeah, thank you very much, and congratulations, sir, on the acquisitions. Just one point on the retail outlet profile for Capital Foods and for Soulfull. Is it broadly similar or are these the profile of the retail outlet right now very different? So the profile of the retail is a typical Kirana store, which you and I see up and down the street. It's just that some of the stores would sell products like Soulfull for breakfast cereals, et cetera. Some of them would sell snacking. But I don't think there is a specific profile of a store which sells only Soulfull or only Capital Foods per se. We do think there is an opportunity to expand into the broad majority of the stores that we cover, and that is one of the big drivers for growth. Okay. Sir, will you be able to help us with some numerical number on the chemist outlet, maybe in metros, what could be the opportunity, especially when you said that Organic India could be used as a medium to scale up in that sense? So on specifically, while Organic India does provide us the heft in our portfolio to now address the pharma channel, now that we have signed the agreements, now we will get down to work on what is the number of outlets available, what is that we can address, how can we go there? And I would say in the next three months or so, we should be able to work out our detailed go-to-market strategy. Because remember, the pharma channel operates slightly differently from all the other channels that we are used to addressing. We've got to make sure we've got various choices to address the go-to-market there. We've just got to make sure we pick the right choice and then execute strongly behind that. Okay, that's it. Thank you so much. Thank you. Moderator, we'll just go to the webcast now and take a few questions from there. Yes, ma'am. There's a question from Tejas at Avendus, Sunil. He's asking: In your strategic perspective for future targets, do you lean towards acquiring small brands in underexplored markets, large brands in saturated markets, or the optimal scenario of prominent brands in less explored categories? So, Tejas, I think, my ideal scenario is wherever I can create value, with the amount that I would pay for inorganic acquisition, right? So it is not necessarily... There's different, different types of work and different types of effort in all the scenarios that you mentioned. Small brand in underexplored market or a large brand in saturated market. Each one has a different challenge. A, like I said, we will look at the strategic and financial fit, A. B, our ability to create value out of that. C, to make sure that we create the value, we do have the competencies and capabilities, right? Or we are getting them with the targeted acquisition. So I don't think there is a cookie-cutter formula in any of them. We look at every opportunity on its own merits. Okay, thanks, Sunil. There is a question from Ronak at Equirus. He's asking: Given that the growth rates in Organic India have been on the lower side for the last three years, especially, and EBITDA margin also has been volatile, do you think you need more work there versus Capital Foods? So I think I already alluded to the fact that both Capital Foods and Organic India, there has been a lot of noise in the numbers, both top line and bottom line, if you look at them historically. They've gone through some amount of internal issues, et cetera, which now they are on top of, and they are, I would say, is currently sailing smoothly. Both of them have different things that I need to execute to deliver value. Capital Foods, relatively easier plug-and-play in my distribution system, because most of the growth will be in India, little bit into export opportunities, et cetera. Organic India, I think we've got to execute both India and internationally, and we've got to build a go-to-market system. But remember, just as a perspective, Organic India gross margins are significantly higher, and therefore, for the extra effort, I think the money that we realize on the bottom line is also significantly higher. So it might take a little bit of time, but not too different, from each other. Thank you. Thank you, Sunil. There is a question from Bharat Sheth at Quest. He's asking: Can you give some color on geography-wise exports of Capital Foods and our presence in those regions to grow export at accelerated pace? So Bharat, I think we already alluded to it in our presentation. I think the strong markets for Capital Foods are, I mean, strongest relationship with the retailers are U.S., Middle East, and Australia. They're also present in other markets around Europe and, say, Canada. But given the fact that the largest Indian diaspora market exists in U.S., U.K., Canada, Australia, which is exactly where our footprint is, I, I do think these will be the markets which we will focus on to drive accelerated growth. Okay. Thanks, Sunil. There's a question from Richard at JM Financial. I think LK has partly addressed it already with respect to how much the goodwill is in our EPS. Richard, I think we'll have to have a conversation offline. We've also seen your comments in your report, so, we can have the conversation offline. And, we have given a direction statement, as I mentioned. It also depends on the funding plan, right? That is, you, you have assumed some cost of capital, done some working, which we also don't understand, so maybe we can take it offline. Sure. Thanks, LK. Again, there's a question from Ajay asking how much is the goodwill. I think we've already addressed it. And then there is a question from Vismay. Vismay, I think you've already asked on the other Q&A. There is a question from Harini asking, "Even with a strong double-digit growth and operating margins north of 20%, can we see a payback period shorter than eight years? And what is the ballpark IRR that we target in such deals? I think we generally look at an IRR in excess of 18%-20%, and this, I think, will be ahead of that. So we are fairly confident, given the growth rate, given the potential revenue synergies and cost synergies, we are confident of meeting that or exceeding that. Okay, thank you, LK. There's a question from Mudit at Franklin Templeton. He's asking if Organic India's gross margins were 67% in FY 2022 and 62% in FY 2023, why are we talking about a 55% gross margin in your communication? Yeah, so just as a perspective, the way we calculate gross margins is slightly different from the way either Capital Foods or Organic India calculate gross margins. We take all variable logistics, et cetera, into the gross margins in our calculation. Therefore, fundamentally, even without doing anything, you will see the numbers lower. And I would think, if anything, gross margins, like I said, given the 200-400 basis points—I mean, synergies coming in straight from trade margins itself, which will drop into gross margins, I do think we will deliver higher than what they were delivering. Okay, thanks, Sunil. There is a question. There's a question from Disha at Ashika Stock Broking. She's asking, could you please elaborate on the 12,000+ farmer network that Tata Consumer will get access to from the acquisition of Organic India? Yeah, so like I, I think I already alluded to it in the presentation, they have got a team of 130 people at the back end, primarily focused on farmer connect, making sure that the farmers, A, they get the right planting advice, B, they get the right advice on how to grow organic, how to grow their productivity, et cetera, which crops to grow, forward-looking projections. 2,000+ is directly addressed by their team, the other is indirectly addressed. They're roughly in four or five big clusters centered around Northern India. We will get access to that entire network. What that allows us to do is not only leverage that network for the current range of products, but if we want to expand into any new categories, we get a range of farmers who have a fantastic relationship, have grown through the years with Organic India, and therefore, very high level of credibility, goodwill, and trust with the company. We aim to continue that and leverage that for expanding the portfolio. Thank you, Sunil. There is a question from Jasmine. She's asking: The year-on-year revenue growth for Organic India has been declining over FY 2022 and 2023. Could you give any explanation for that? Like I mentioned, both Capital Foods and Organic India went through their own upheavals over the past few years. I think Organic India did a lot of cleanup. You will see not only in the growth rates, you will also see in the EBITDA numbers. I think they basically had to a cleanup to do, to clean up some issues of the past. They did that and took the entire hit, both on the top line and the bottom line in FY 2023. FY 2024 is a clean sheet, well-run operation, and that's what we're looking at. Thanks. Thanks, Sunil. Moderator, maybe we'll just take one final question from the Q&A queue. Noted, ma'am. Thank you very much. Next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yes, sir. Can you talk about current distribution reach of Tata Consumer benefited to Organic India, internationally and domestically? I think we already gave the numbers. I mean, Organic India, in India, is present in 24,000 outlets. Tata Consumer, directly, we touch 1.5 million, and our total numeric reach is 3.8 million. I'm talking- Internationally, they have 48, they export to 48 countries. 40% of their total business comes out of the U.S., and out of that, a significant portion comes out of three big chains, which is Whole Foods, Sprouts, and The Natural Grocer. No, no, I'm talking about how much, how much percentage of total reach we have domestically and internationally, we are going to get a benefit of that current distribution. Of course, I don't get the number. I mean, I should be able to sell Organic India teas and infusions in almost all my outlets. Okay. So are you, are you saying... Are you asking for, in those 24,000 outlets, how many will I get into? Both sides synergy, we are talking about. Just one point, I'm talking of INR 15 lakh, and you're talking INR 24 lakh. Sorry, uh, I think the synergies are more. We would be covering all the 24,000 outlets. Let me put it in short. Apart from some of the Fabindia outlets, where we will continue to have the products listed going forward, there are Organic India some 16, 17 standalone outlets, which we are evaluating as we speak. Okay. Okay. Thank you so much. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I would now like to hand the conference over to Mr. Sunil D'Souza for closing comments. Thank you. Thanks, everyone, for joining us. I'll just go back to our stated intent of becoming a large FMCG company, focusing first on food and beverage, number one. Number two, also saying that we will grow organically and inorganically, and when we look at inorganic opportunities, we will make sure they're value-creating. Both the acquisitions that we talked about today fit in perfectly along with our stated platforms in the food and beverage space, are in faster-growing categories, are higher gross margins than our current business. We do think there are significant synergies to be derived, starting from trade margins downwards on fixed costs, and therefore, while they deliver EBITDAs, Capital Foods, for example, is 20% EBITDA already. We are extremely confident that we will be able to add to those EBITDAs. Just as a perspective, my EBITDA is currently in the 15%-16% range, so significantly accretive, even standalone EBITDA going forward. Apart from the fact that we get two strong umbrella brands, we get two decently strong supply chains, one extremely strong agri sourcing supply chain, a set of people with knowledge, institutional knowledge in those categories, great relationships with retailers globally, and perfect synergies in the outlets that we address to drive both top line and incremental bottom line for us. Also, we're looking at funding options to make sure that we can, in the short term, while we execute these opportunities, we will continue to explore opportunities as we go forward to make sure we continue the momentum on growth for Tata Consumer. Thank you. Thanks, everyone, for joining. Thank you. On behalf of Kotak Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.