This stock hit upper circuit 16 times in a row; here’s why

Shares of Lotus Chocolate Company (Lotus) were locked in the upper circuit for the sixteenth straight session, up 5% at ₹209.90 on the BSE on Monday. Driven by recent rally, the microcap stock touched its fresh all-time high levels, surging 188% in the past two weeks from ₹96.4 on December 23, 2022. The stock hit its 52-week low of ₹81.9 on March 9, 2022.

Investors are betting high on the packaged foods company after billionaire Mukesh Ambani-led Reliance Industries last month acquired a majority stake in Lotus through its fast-moving consumer goods arm, Reliance Consumer Products Ltd (RCPL). The stock has been consistently hitting its 5% upper limit after RCPL announced acquisition of a 51% stake in Lotus for ₹74 crore on December 29, 2022.

On Monday, Lotus Chocolate shares closed 5% higher at ₹209.90 against Friday’s closing price of ₹199.95 on the BSE. The market capitalisation climbed to 269.53 crore. In comparison, the S&P BSE Sensex closed 168 points lower at 60,093 levels.

Last month, RCPL, the wholly-owned subsidiary of Reliance Retail Ventures, acquired 65.48 lakh equity shares of Lotus from its current promoters at a price of ₹113 per share. Lotus Chocolate Company and Prakash P Pai, Ananth P Pai, and other members of the current promoter group of Lotus executed definitive agreements with RCPL. As part of the deal, RCPL and certain promoter group entities of Lotus will subscribe to 5,07,93,200 non-cumulative redeemable preference shares of face value of ₹10 each. Besides, it also made an open offer to acquire up to 33,38,673 equity shares, representing 26% of the equity share capital of the company, from the public shareholders of Lotus.

"Reliance is excited to partner with Lotus who have created a strong cocoa & chocolate derivatives business through sharp business acumen and perseverance. The investment in LOTUS underlines our commitment to further boost indigenously developed daily use high quality products, to serve a broad customer spectrum at affordable prices. We look forward to working with the highly experienced management team of LOTUS as we further expand the business and drive its next growth phase," Isha Ambani, Executive Director of Reliance Retail Ventures, had said on the deal with Lotus.

In a recent filing to the exchange, Lotus Chocolate said it has appointed DAM Capital Advisors to manage the open offer, while KFin Technologies has been appointed as Registrar to the offer.

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. The brand, which will compete with the likes of Tata Consumer Products, Hindustan Unilever, Nestle India, Britannia Industries, and ITC, amongst others, will sell made-in-India consumer products ranging from processed foods to daily products. 

Last month, 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.