ITC shares inch higher as cigarette-to-hotel conglomerate acquires Yoga Bar maker

ITC shares edged higher on Wednesday after the FMCG major announced the acquisition of Sproutlife Foods, which owns the direct-to-consumer (D2C) brand Yoga Bar. ITC signed a binding term sheet to acquire a 100 per cent stake in the Yoga Bar maker over a period of 3-4 years.

The ITC stock opened 0.5 per cent higher at Rs 334 apiece and held on to the green.  

Sproutlife Foods is a startup engaged in the manufacturing and sale of products catering to health-conscious consumers under the new-age digital-first brand Yoga Bar. The company registered a turnover of Rs 68 crore for the year ended March 2022.

Also Read: ITC's Yoga Bar acquisition adds firepower in FMCG major's arsenal to take on HUL in health and wellbeing space

ITC will initially acquire a 47.5 per cent stake in SFPL in tranches by March 2025, and acquire the remainder stake basis pre-defined valuation criteria subject to conditions agreed in the binding documents, according to a statement by the FMCG company.

An initial investment of Rs 175 crore will be made through primary subscription and secondary purchases for the acquisition of 39.4 per cent of the paid-up share capital, which is expected to be completed by February 15, 2023, ITC said.

ITC share price past performance 

ITC shares were one of the top blue-chip gainers in the calendar year 2022. As of Wednesday, the stock has risen as much as 51 per cent in the past one year.

The market expert Shubham Agarwal recommended to Buy ITC shares as he believes the stock could touch a target of Rs 400 per share and advised to keep a stop loss of Rs 300 apiece. 

ITC Results: What to expect

ITC will report its financial results for the October-December period on January 26. 

ITC's revenue is expected to grow 5.9 per cent in the December quarter on the back of strong growth in cigarettes, FMCG, paperboard and hotels, according to Sanjay Manyal, Research Analyst at ICICI Securities.

Also Read: ITC shares under pressure ahead of Budget amid murmurs on sin tax hike

“We estimate 10.3 per cent cigarette sales growth led by 7 per cent volume growth. The FMCG business is expected to see strong 19.2 per cent growth led by traction in discretionary categories, price hikes taken in the last year, and recovery in education and stationery business,” he said. 

The analyst estimates 12.6 per cent growth in the company's operating profit on account of operating leverage in cigarettes and softening of palm oil prices. He is of the view that ITC may report 8.4 per cent growth in net profit for the December quarter.