Stock hits 5% upper circuit after Reliance acquires 51% stake in the company

Shares of the chocolate company opened 5 percent higher and hit the upper circuit after it informed that Reliance Industries’ arm acquired a majority stake in it. Its shares were locked at 152.40 apiece on the Bombay Stock Exchange (BSE). The company manufactures chocolates, cocoa products, and cocoa derivatives. 

According to an exchange filing, Reliance Consumer Products (RCPL), the step-down subsidiary of Reliance Industries has completed the acquisition of 65,48,935 equity shares representing a 51 percent controlling stake in Lotus Chocolate Company for an aggregate consideration of ₹ 74 crores. 

The deal was announced on December 29, 2022. According to the purchase agreement, RCPL had proposed to acquire a 77 percent stake in the company through a secondary purchase from its promoters Prakash Peraje Pai and Ananth Peraje Pai, followed by an open offer. 

After the acquisition of a 51 percent stake, RCPL made a public announcement to acquire an additional 26 percent of the equity share capital of Lotus in line with the SEBI Takeover Regulations. 

RCPL is a subsidiary of Reliance Retail Ventures Ltd (RRVL), which is a subsidiary of Reliance Industries. RRVL operates an integrated omni channel network of 18,040 stores and digital commerce platforms across grocery, consumer electronics, fashion and lifestyle, and pharma consumption baskets 

With a market capitalization of ₹ 186 crores, Lotus Chocolates is a micro-cap company. It has a negative return on equity of 1093.85 percent and a high debt-to-equity ratio of 6.64. Its shares were trading at a price-to-earnings ratio of 246.48, which is exorbitant as compared to the industry P/E of 20.19, indicating that its shares might be overvalued as compared to its peers. 

Written By Simran Bafna 

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