ITC Ltd has concluded the acquisition of spice maker Sunrise Foods Pvt Ltd at a price tag of Rs 2,150 crore.

The deal marks the biggest buyout by ITC — the first under chairman Sanjiv Puri — which has so far focused on building its own brand from scratch. The company made an upfront consideration to the owners of Sunrise on a cash-free debt-free basis and concluded the transaction on Monday.

In addition, the sellers are entitled to contingent consideration of an amount not exceeding Rs 150 crore, which is payable upon Sunrise achieving mutually agreed operational and financial milestones over a period of two years, ITC said in a regulatory filing.

Sunrise is expected to satiate ITC’s cravings to fast expand into the high-margin masala business which is catching the fancy of many companies and investors. Only a fraction of the Indian spice market is branded and there are few players with a significant national presence.

However, at least two large corporate houses are beefing up their presence in the spice segment. Tata Consumer Products is expanding its Tata Sampann brand while Emami Agrotech has forayed into this space with the Mantra brand. ITC also has a presence in the spice category with its Ashirvad brand, which is the market leader in Telangana and Andhra Pradesh.

Sunrise, which clocked sales worth Rs 591.50 crore in 2019-20, is a market leader in eastern India. Around 85 per cent of their business comes from Bengal, where it is doing business for 70 years.

Abneesh Roy, executive vice-president of Edelweiss Securities, feels ITC will be able to scale up the business outside Bengal. Commenting on the valuation, Roy said it was reasonable, given that Sunrise is of a decent size, profitable and a market leader. “Spice is a good margin business. A valuation of four times of sale is reasonable. In FMCG, there are not many opportunities to acquire a market leader,” he noted.

The acquisition will augment the company’s product portfolio and is aligned to ITC’s aspiration to significantly scale up its spices business and expand its footprint across the country, the company said in the regulatory filing.

The deep consumer connect of Sunrise in the focus markets, together with synergies arising out of the sourcing and supply chain capabilities of the company’s agri business and its pan-India distribution network, will provide significant value creation opportunities for the company, it further added.

Sunrise has five factories, one in Howrah, one in Agra and three in Rajasthan.

Sunrise sells basic spices such as haldi, mirchi, blended spices like garam masala, shahi masala and whole spices like cumin. It also has papad and mustard oil in the portfolio. The company has 500 odd people on the rolls. They are expected to be absorbed by ITC.

ITC, which earns most of the revenue and profit from sale of cigarette, is also rapidly scaling up foods business which is part of non-tobacco FMCG. In the first quarter, this is the only segment (other than agri-business) which reported revenue and profit jump despite lockdown blues.