Bisleri Getting Sold. Why?

“Har paani ki bottle Bisleri nahi!” - Bisleri

When you think of packaged water, Bisleri International Pvt Ltd is the first company that springs to mind. This brand will soon be sold. Customers will continue to be able to purchase it under the same name. Ramesh Chauhan, the company's CEO, really chose to sell it, and Tata Consumer Products Ltd. is leading the pack of potential buyers. But concerns are being raised about how it came to sell despite being the most well-known brand in the nation and performing well in business.

History

Italian businessman, entrepreneur, and scientist Signor Felice Bisleri created the company Bisleri International Pvt Ltd. Felice Bisleri first intended to use the ingredients in Bisleri—cinchona, herbs, and iron salts—as an alcohol treatment.

Dr. Rossi acquired ownership of the Bisleri firm upon the passing of Felice Bisleri on September 17, 1921.

Ramesh Chauhan paid just Rs 4 lakh to purchase Bisleri in 1969, four years after the water plant's start-up. After 1969, when Parle and Bisleri created a variety of items for the markets, including beverages, soft drinks, and soda, Bisleri had a rapid expansion.

Present-Day

Nearly 30 years after selling the soft drink companies Thums Up, Gold Spot, and Limca to Coca-Cola, 82-year-old Ramesh J. Chauhan will sell his packaged water firm Bisleri to Tata Consumer Products Ltd (TCPL) for around Rs 6,000–7,000 crore.

Reason

Old Age and Ill Health

Ramesh Chauhan, the chairman of Bisleri, the biggest bottled water manufacturer in India, is an octogenarian. According to a story from ET, the Bisleri contract has ended for a variety of factors in addition to old age and ill health.

The daughter has little interest 

The article stated that Jayanti, Ramesh Chauhan's daughter and vice chairperson of Bisleri, had little interest in the company. As a result, Bisleri is being prepared for sale.

Statements by Ramesh Chauhan

Talks with Tata have been ongoing for two years. He made up his mind after meeting with Sunil D'Souza, CEO of Tata Consumer, and N Chandrasekaran, chairman of Tata Sons, a few months ago. He mentioned to The Economic Times Times that he likes and trusts TATA.

Chauhan observed that the transaction involved more than just money "Even I am unsure of what I will do with the money, but let me be transparent. I was more concerned to locate a home that would take care of it as I did than just the value, I am getting for it. I founded this company with passion, and today its staff members manage it with the same zeal "he stated.

Chauhan intends to refocus and engage in environmental and social issues including water harvesting, plastic recycling, and assisting the underprivileged in accessing healthcare after selling his bottled water business.

He has delegated the day-to-day operation of Bisleri to a qualified group led by CEO Angelo George. According to Chauhan, the Bisleri brand's FY23 revenue was anticipated to be Rs 2,500 crore and its profit to be Rs 220 crore.

But does the Tata group company really get a good deal?

According to TCPL's most recent annual report, the firm provides four types of water products: packaged drinking water (Tata Copper Water), natural mineral water (Himalayan), fortified water or energy drinks, and fruit-based beverages (Tata Fruski). Himalayan is a high-end company.

Himalayan was the first item in the "naturally derived mineral water" category, and the business asserts that this brand is currently the market leader. Sales increased by double in FY22, but on a modest basis, and they also turned a profit.

According to the industry observer previously cited, TCPL has had trouble competing with Tata Copper, a mass-market brand, "because it lacks experience in marketing a product at the Rs 10–20 pricing segment." For any brand to flourish in the competitive bottled water industry, it takes more than simply money.

With the acquisition of Bisleri, Tata Consumer Products will get more than 10 lakh contact points, more than 5,000 distributors, and roughly 130 co-packers. It would have been nearly difficult for TCPL to develop this important network and distribution capabilities on its own.

Tata Consumer could need to incur substantial debt to close the transaction at Rs 7,000 crore. While the worth of the overall stake is higher at Rs 5,000 crore, the consumer division has net cash of roughly Rs 2,000 crore. According to research by Nuvama Wealth Management, “If Tata Consumer acquires Bisleri only via debt, interest cost may significantly dent profits from Bisleri,”

The bottled water industry is also not very profitable. In FY20, the pre-COVID year, Bisleri declared a net profit of Rs 102 crore on revenues of Rs 1,472 crore. This suggests a net profit margin of 7%.

The combined net profit margin for Tata Consumer Products in FY22 was roughly 9%.

Growth potential

The 20-litre water jars made by Bisleri that are available in malls, businesses, and other places have growth potential, according to analysts. They think this B2B market can produce more earnings.

Additionally, with the acquisition, TCPL will have access to Bisleri's robust distribution network of 4,500 distributors and 5,000 trucks throughout India and its neighbours.

Analysts said that if Tata Consumer can utilise this network for its goods, it may be another growth driver.

In conclusion, Tata may appear to be saving money by acquiring the market leader. In the near aftermath, it will have to deal with fierce local competition, thin profit margins, and weak pricing power.

Source: moneycontrol.com