Lotus Chocolate hits upper circuit as Reliance makes open offer to buy 26% stake

Shares of Lotus Chocolate hit 5% upper circuit on Friday after two Reliance group companies — Reliance Consumer Products Ltd and Reliance Retail Ventures Ltd — announced an open offer to acquire a 26% additional stake in the chocolate maker.

The firms will together acquire 33.38 lakh shares of Lotus Chocolate from the open market at a fixed price of ₹115.50 per share, said a notice by DAM Capital, which is managing the offer.

Reacting to the development, the Lotus Chocolate Company stock jumped 5% to ₹156.80 on the BSE. Shares of Mukesh Ambani-led Reliance Industries rose nearly 1% to ₹2,536.90 on the BSE.

The offer will aggregate to a total consideration of ₹38.56 crore over the full acceptance, said an open offer-detailed public statement shared by the company with stock exchanges on Thursday. The open offer starts on February 21 and closes on March 6, said the public notice.

Reliance Consumer Products Ltd, the fast-moving consumer goods arm of Reliance Industries, acquired a 51% stake in Lotus Chocolate Company for ₹74 crore last week.

RCPL, the wholly-owned subsidiary of Reliance Retail Ventures, acquired 65.48 lakh equity shares of Lotus from its current promoters at a price of ₹113 per share, according to RIL's stock exchange filing.

The capital infused by RCPL is expected to help drive the growth and expansion of Lotus Chocolate into a comprehensive confectionery, cocoa, chocolate derivatives and related products manufacturer across industrial and consumer market spectrum.

"Reliance is excited to partner with LOTUS who have created a strong cocoa & chocolate derivatives business through sharp business acumen and perseverance. The investment in LOTUS underlines our commitment to further boost indigenously developed daily use high quality products, to serve a broad customer spectrum at affordable prices. We look forward to working with the highly experienced management team of LOTUS as we further expand the business and drive its next growth phase," Isha Ambani, executive director of Reliance Retail Ventures, said last week.

As part of the deal, RCPL and certain promoter group entities of Lotus will subscribe to 5,07,93,200 non-cumulative redeemable preference shares of face value of ₹10 each.

"We have a vision to build a world class confectionery products business across customer segments backed by best-in-class manufacturing capabilities and talent. Our strategic partnership with Reliance, through this investment, will further enable this vision and accelerate Lotus' transformation," says Abhijit Pai, founder-promoter of Lotus.

Reliance Consumer Products, which has been on an acquisition spree, will buy a 50% equity stake in Gujarat-based Sosyo Hajoori Beverages. In September 2022, the company acquired homegrown soft drink brand Campa from Delhi-based Pure Drinks Group for around ₹22 crore. Campa Cola was a market leader in the Indian soft drink market in the 1970s and 1980s until foreign brands Pepsi and Coca-Cola entered the domestic market in 1990s.

India's largest company by market value forayed into FMCG business in December 2022. Reliance Consumer Products launched its FMCG brand 'Independence' for staples, processed foods, beverages and other daily essentials in Gujarat. The brand will be rolled out across India in a few months.

Last month, RCPL parent Reliance Retail Ventures also acquired a 100% stake in METRO Cash & Carry India, a wholly owned subsidiary of German wholesaler METRO AG, for ₹2,850 crore.