ITC stock jumps after plans to acquire 100% stake in D2C startup Yoga Bar

Fast moving consumer goods giant ITC has signed an agreement to acquire 100% stake in Sproutlife Foods Pvt Ltd, the parent of direct-to-consumer snack startup Yoga Bar, as it looks to expand its reach with food products for health conscious consumers.

The cigarette-to-hotel conglomerate will buy 100% of the share capital of Sproutlife in one or more tranches over a time period of about three to four years, according to its stock exchange filing.

An initial investment of ₹175 crore will be made through primary subscription and secondary purchases for acquisition of 39.4% of the paid-up share capital, which is expected to be completed by February 15, 2023, the filing says.

Further infusion of ₹80 crore will be made through primary subscription, in one or more tranches, by March 31, 2025 or such other later date as may be mutually agreed upon, based on pre-agreed pre-money valuation, it adds.

"47.5% stake in SFPL will be acquired, in tranches, by March 31st, 2025; and the balance stake will be acquired, basis pre-defined valuation criteria, subject to other conditions agreed to in the binding documents," the company says.

Reacting to the news, shares of ITC rose as much as 1.2% to ₹336.55 apiece in the intraday trade on the National Stock Exchange (NSE).

"We believe that this investment is an exciting opportunity that aligns with ITC's Foods Business' aspiration to build a formidable portfolio in the nutrition-led healthy foods space. We look forward to scaling the Yoga Bar brand offering superior and healthy consumer choices. Within a short span of time, Yoga Bar has established itself as a leading brand in the healthy foods space, driven by impactful market positioning and a range of innovative products," says Hemant Malik, divisional chief executive, Foods Division, ITC.

This investment is in line with ITC's strategy to focus on building a future-ready portfolio of products that serve evolving consumer needs. The acquisition will enable ITC to augment its portfolio and enhance market presence in the 'Good for You' space which currently includes Aashirvaad multigrain atta, Aashirvaad Nature's Super Foods, Farmlite range of biscuits, Sunfeast Protein Shake, B Natural Nutrilite ABC Beverage among others.

Yoga Bar is expected to be rapidly scaled up, leveraging ITC's enterprise strengths in areas such as sales & distribution, sourcing, product development, and digital.

Commenting on the transaction, Suhasini Sampath Kumar and Anindita Sampath Kumar, co-founders of Yoga Bar, said, "ITC has a long history of building world-class brands, leveraging its core competencies which encompass superior understanding of the consumer, strong backward linkages with agri supply chain and a deep and wide distribution network. We are confident that this partnership will add to Yoga Bar's competitive advantage and take it to the next level from the current annualised run rate of over ₹100 crore."