ITC to acquire 16% stake in D2C brand Mother Sparsh for ₹20 crore

Diversified conglomerate ITC Ltd will pick up 16 per cent stake in Mother Sparsh, a premium ayurvedic and natural personal care D2C brand, for ₹20 crore. The all-cash deal is expected to be completed in two tranches within the next eight months.

Incorporated in February 2016, Mother Sparsh Baby Care Private Limited focuses on the mother and baby care segment. It reported a turnover of ₹15.44 in FY21. Revenues for FY20 and FY19 stood at ₹3.36 crore and ₹1.13 crore, respectively.

According to the statement, ITC will acquire “16 per cent of the share capital of Mother Sparsh on a fully diluted basis”. The investment will include 100 equity shares and 1980 compulsorily convertible preference shares.

The company, in a stock market notification, mentioned that “the said acquisition will, inter alia, enable access to the fast growing direct to consumer (D2C) space in the 'personal care' category, which has been identified as an area of interest”.

ITC’s FMCG business on its own feet now: Sanjiv Puri

This investment is also in line with the ‘ITC Next’ strategy articulated by Chairman Sanjiv Puri which aims to build a future- ready organisation with a digital first culture.

Over the last few years, ITC has been engaging with the start-up ecosystem while exploring innovative distribution channels.

According to Sameer Satpathy, Chief Executive, Personal Care Products Business, ITC Ltd, the investment provides an exciting opportunity which is in alignment with the company’s aspiration to have a significant play both in the naturals and ayurvedic segment as well as in the D2C channel.

“Mother Sparsh has, within a short span of time, evolved into an effective D2C brand with a range of innovative products and a lot of promise,” he said.

According to Abneesh Roy, ED, Edelweiss Securities, it looks like the right strategy by ITC to acquire a D2C brand; and that too one is positioned at the premium-end and in Ayurvedic space. Being premium will allow companies to do ad spending for scaling up. 

 “Ayurvedic offerings will continue to gain market share. Buying an established D2C brand makes a lot of sense. Also, culturally a D2C brand will be different from a large, legacy company, and so it makes sense to acquire a start-up,” he said, adding that ITC has been aggressive in terms of good acquisitions in FMCG innovations like nasal spray for Covid.

“Many other companies like Marico, Emami, Colgate and others have already done acquisition in D2C. Valuation of mother Sparsh also looks reasonable given likely high growth and D2C space,” Roy said.

COMMENT NOW