Shares of Lotus Chocolate, which manufactures chocolates, cocoa products and cocoa derivatives, have been hitting upper circuit for the last two trade sessions. The stock witnessed trend reversal after falling nearly 60% in the last eighteen consecutive sessions after a revised open offer by billionaire Mukesh Ambani-led Reliance group companies to acquire a 26% additional stake in the company. In December last year, the retail arm of Reliance Industries acquired a 51% controlling stake in Lotus Chocolate Company from the current promoter and promoter group and also announced an open offer to the public shareholders for 26%.

As per the revised open offer filed on March 8, Reliance Retail Ventures Ltd (RRVL) and its subsidiary, Reliance Consumer Products Limited (RCPL) will acquire 26% additional shares of Lotus Chocolate from public shareholders, which will begin on March 16 and end on March 31. The companies will offer to acquire 33.38 lakh shares of Lotus Chocolate from the open market at ₹115.50 apiece payable in cash, amounting to ₹38.56 crore. The floor price for the open offer is 43.5% lower than the current market price.

On Thursday, Lotus Chocolate shares opened higher for the second straight session and locked in 5% upper circuit at ₹204.60 apiece, against the previous closing price of ₹194.90 on the BSE. The stock has gained 10% in two days after plummeting nearly 60% in the last eighteen consecutive sessions. The market capitalisation of the microcap stock stood at ₹262.7 crore at the time of reporting.

The stock trades 57% lower than its all-time high of ₹480.45 on February 9, 2023, while it slipped to a 52-week low of ₹81.90 on March 9, 2022. The recent volatility in Lotus Chocolate shares can be attributed to profit booking and weak financial performance as investors preferred to exit the stock ahead of the open offer by Reliance Group.

The stock has risen 136% in a year and 37% in a six-month period. On a year-to-date basis, the counter has jumped 59%, while it fell 53% in a month.

Established in 1988, Lotus Chocolate is primarily a B2B packaged foods company that supplies cocoa products to companies such as Cadbury, Britannia, Vadilal, and Amul. The B2B business accounts for nearly 95% of the company’s revenue, while it generates the remaining 5% from the B2C segment, which consists of brands such as Chuckles and Milky Punch, sold only in South India, and in some regions of Gujarat and Maharashtra. 

For the December quarter of the current fiscal (Q3 FY23), Lotus Chocolate reported a net loss of ₹0.73 crore, while net sales dropped 41% year-on-year to ₹13.27 crore. On the operating front, EBITDA stands negative at ₹0.69 crore in December 2022.

In December last year, Reliance Consumer Products Ltd (RCPL), the fast moving consumer goods arm of Reliance Industries, acquired a 51% stake in Lotus Chocolate Company for ₹74 crore. The Mukesh Ambani-led conglomerate also proposed an open offer to acquire another 26% stake in the chocolate maker at a fixed price of ₹115.50 per share. The capital infused by RCPL will help drive the growth and expansion of Lotus into a comprehensive confectionery, cocoa, chocolate derivatives and related products manufacturer across industrial and consumer market spectrum.

Reliance recently forayed into the FMCG business through its arm, RCPL, by launching a brand 'Independence' for staples, processed foods, beverages, and other daily essentials in Gujarat. The brand will be rolled out across India in a few months. Besides, RCPL parent Reliance Retail Ventures acquired a 100% stake in METRO Cash & Carry India, a wholly owned subsidiary of German wholesaler METRO AG, for ₹2,850 crore.

Reliance has been on an acquisition spree after Isha Ambani, during the company’s 45th AGM in August 2022, announced that Reliance Retail will enter the FMCG space. In September, the company acquired the homegrown soft drink brand Campa from Delhi-based Pure Drinks Group for around ₹22 crore. RIL also acquired another soft drink brand Sosyo from Surat-based Hajoori. Over the last three years, Reliance Retail has acquired brands like Hamleys, Just Dial, Milkbasket, Zivame, Clovia, Portico, Netmeds, and Urban Ladder among others. It has also partnered with 7-Eleven, the iconic global retail chain, to start its operations in India.

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