FMCG Giant Hindustan Unilever Ltd In Talks To Buy Majority Stake In MDH Spices

In what can turn out to be a mega-deal, FMCG Giant Hindustan Unilever Ltd (HUL) is in talks with Mahashian Di Hatti Pvt. Ltd (MDH) to buy a majority stake in the maker of MDH Spices, as per a report in Mint.

Given its pan-India appeal and reach, MDH could be valued between ?10,000 crores and ?15,000 crores, as per the report.

However, commenting on the Mint report, HUL told CNBCTV18, "We do not comment on market speculation.¡±

Youtube/MDH

Industry Outlook

Overall, even though the spice business has been a tough market to crack for bigger companies because consumer preferences and cooking habits differ from state to state, MDH has proved to be an exception.

MDH has had a wider presence in the country through its innovative TV commercials over the decades.

MDH Spices sells more than 60 products across the country and deals with at least 1,000 wholesalers and hundreds of thousands of retailers. Its website claims the company can produce a whopping 30 tonnes of spices a day.

Also Read: From Tonga Driver To Master Of Spices, MDH Dadaji Mahashay Dharampal Gulati's Inspiring Journey

Past Deals & Finances

MDH earned ?507 crore operating profit in FY21 on net sales of ?1,191 crores and is already enjoying a 42.5% EBITDA margin, which is much higher than HUL's 25.2%, as per a report in BusinessToday.

So, if the deal goes through and MDH spices get added to HUL's vast portfolio, it would not only help HUL enter the uncharted territory of branded spices but would also help improve its margins further.

Financial services firm Avendus had reportedly estimated that the branded spices market size will be doubled to ?50,000 crores by 2025, but the market is dominated by regional champions.

According to a report in Moneycontrol, in the past spice makers saw quoting valuations worth 12-15 times the EBITDA. For example, ITC had bought Kolkata¡¯s Sunrise Foods for ?2,150 crores upping its valuation 25 times the previous year¡¯s operating profit. Sunrise¡¯s FY20 EBITDA was ?88 crore on a revenue of ?591 crores.

Also Read: Explained: Amazon¡¯s Battle With Future Group & Reliance For Retail Supremacy In India

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