Sundrop Brands

Agro Tech Foods Limited (ATFL) announced the acquisition of 100% of Del Monte India. This will be an equity-based transaction, with ATFL issuing 35% of its equity to Del Monte's shareholders (Bharti Group 21%, Del Monte 14%). This move is expected to double the overall company's size and profits, leveraging complementary product portfolios and distribution strengths.

The company will be rebranded as 'Sundrop Brands,' leveraging the heritage of the 40-year-old Sundrop brand. This new corporate identity aims to host a stable of well-known food brands, including licensed brands like ACT II and the newly acquired Del Monte, to create a powerhouse of food brands with strong global affiliation and recall.

The acquisition brings highly complementary product portfolios, with Del Monte strong in Italian food products, sauces, and canned fruits, while ATFL excels in popcorn (ACT II) and nut butter (Sundrop Peanut Butter). Del Monte's business is split 50-50 between food service and B2C, contrasting with ATFL's primary B2C focus. The combined entity will have a balanced distribution mix of 53% General Trade, 18% Food Service, 15% Modern Trade, and 11% E-commerce/Quick Commerce, enabling cross-leveraging of distribution networks and manufacturing facilities.

For FY24, Sundrop brands reported INR760 crores revenue with INR34 crores EBITDA (4.5% margin), while Del Monte India had INR542 crores revenue with INR22 crores EBITDA (4.1% margin). In H1 FY25, Del Monte India achieved INR300 crores revenue with INR15 crores EBITDA (5% margin). Management expressed confidence in achieving double-digit EBITDA margins for the combined entity in the long term, driven by scale, operational efficiencies, and supply chain optimization, with food business gross margins targeted at 40-50%.

The combined entity will benefit from an expanded manufacturing footprint, with ATFL's seven facilities and Del Monte's plant in Punjab, plus two oil plants. This allows for closer proximity to consumers, ensuring freshness and reducing logistics costs. The strategy includes leveraging ATFL's general trade strength for Del Monte products and building new-age channels like e-commerce and quick commerce for all three brands.

Management emphasized a renewed investment focus on core brands (Sundrop, ACT II, Del Monte) to drive accelerated growth. Capital allocation decisions will prioritize return on capital and building a capital-efficient business. The company aims to grow organically through innovation and by evaluating further complementary acquisition opportunities, while also addressing the Sundrop edible oil business to regain market share through measured pricing strategies.