Daybreak - ITC’s 24 Mantra deal and organic foods’ unending wait for glory

Episode Date: April 25, 2025

In this episode we fill you in on three standout stories from the past week. First, what ITC’s acquisition of 24 Mantra means for the larger organic food market; Next, Musk’s latest attempt to save Tesla; And finally, why Blusmart’s unravelling was an eventuality we all chose to ignore. Check out the newsletter and podcast mentioned in this episode: The latest edition of Trade Tricks The Nutgraf: Blusmart and the dogs that didn’t bark

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Hello and welcome to Daybreak. I'm Rahil and in this episode, we dive into three big stories from the world of business and tech this week.

First, what ITC's acquisition of 24 Mantra means for the organic food market industry. India. Next, Musk's latest attempt to save Tesla. And finally, why Blue Smart's unraveling was an eventuality we all chose to ignore. When the Tata Group acquired Fab India owned Organic India last year, a lot of people were a little surprised by the deal. Yes, Organic India is among the oldest organic food companies in the country, but despite being in the business nearly three decades, it was barely profitable. And yet, Tata consumer product, Limited was willing to pay close to 2,000 crore rupees

to acquire it. That's nearly six times the brand sales in FY24. Now, if you asked an analyst at the time, they would likely tell you that despite all of that, Tata's decision was an absolute masterstroke, because it would give it a head start in a business that

was on the verge of a massive breakthrough. So, why then, almost exactly a year later, was ITC able to acquire a Sreshta natural bio products, which is the owner of 24 Mantra Organic, another one of India's oldest and best known organic food brands for a mere 470 crore rupees. For context, that's just about 1.6 times the brand sales.

It seems like a steel compared to the Tata Organic India deal, don't you think? And you're probably wondering now, how did they manage to pull that off? Has the organic food industry taken a turn for the worse in recent months? Or was Tata's assessment last year completely wrong? Well, no. In fact, anything but. When the Ken's deputy editor, Sita Ramanji, spoke to Steshra's founder, Rajhaka Reddy Selem, he said now is as good a time as any for the likes of 24 Mantra. Ilalti credited quick commerce for that.

You see, through instant grocery delivery, these brands have finally found a distribution channel that is in price-sensitive supermarkets or fatigue-inducing e-commerce marketplaces. But despite his optimism. The numbers tell a different story. After a sharp rise in FY21, when consumers scooped up at home wanted to eat better, 24-months annual sales have been largely flat ever since. They stand at around 300 to 320 crore rupees. Now, one reason for that is that a lot of buyers have gone back to purchasing conventional grains, pulses, oils, things like that.

But the other reason is that the state-run apex body for farm exports decided to suspend half a dozen and certification agencies out of a total of 20. The move along with the export bans on wheat and sugar and the US's anti-dumping policy on soy meal halved India's annual organic exports to under $500 million in the three years ending FY24. What could have also worked to ITC's advantage is that 24-monthra's investors must have been quite eager

for an exit after its listing plans fell through. Venture East and People Capital, which control three quarters of the company, have been 24 mantras backers since 2007 and 2011, respectively. That's an eternity in the venture capital universe. But if you're thinking, hey, organic India must be thriving. Well, think again. Its performance is just as underwhelming.

Its sales have been falling steadily, and even though its margins are better than 24 mantras, Tata consumer has probably realized by now that it was a little too generous with its offer. Here's a worrying stat. Neither of these two brands, despite being the oldest and most well-known in the country, have been able to reach 500 crore rupees in sales. Let's try and unpack why that might be the case.

Perhaps it's because even the elite, the money class, don't think that these products are worth the 60 to 70% premiums they command over their more affordable alternatives. There's also the fact that there isn't full clarity on just how organic these products really are. But perhaps that's where the backing of powerhouses like Tata and ITC will help. Because on their own Organic India and 24 Mantra couldn't afford to decrease that premium. But now they might, at least to some extent. It's not just about a more efficient shop floor and squeezing some margins from retailers.

Scaling this business means ridding thousands of acres of farmland of synthetic agri-input residues. That is at least a three-year process. This also means persuading more cultivators to make that switch, which would require a growing base of shoppers to willingly fill their carts with more organic food. And that will definitely take a while. Next up, the latest on Tesla and Elon Musk. Tesla boss Elon Musk has been in the doghouse, or should I say the doge house, for quite a while now. You see, business has not been looking good.

Just this week, Tesla reported a 20% drop in car. sales for the first three months of the year compared with the same period last year. Meanwhile, profits have dropped more than 70%. Investors aren't happy because in the process, naturally, they have lost a lot of money too. And a big reason for that has been Musk's extracurriculars. His political leanings have sparked worldwide protests and boycotts of Tesla cars. Just to jog your memory, Musk, who also happens to be the richest person in the world, contributed more than a quarter of a billion dollars to Trump's re-election campaign last year.

And then we all know how he went on to lead the freshly minted Department for Government Efficiency, or Doge last year. Recently, the company warned its investors to brace themselves for some more losses. They blame the quote-unquote changing political sentiment, saying that it will likely hurt demand. Of late, Musk and the Trump administration have been at odds over the much-talked-about tariff war between the US and China. You see, Trump's exorbitant tariffs on China are weighing quite heavily on Tesla.

While yes, Tesla vehicles are assembled in the US. Several parts are actually made in China. So this rapidly evolving trade policy is going to hurt its supply chain and in the process increased costs quite substantially. Which explains why Musk went ahead and made a rather unexpected announcement at his company's earnings call this week.

And next month, May, my time allocation to Doge will drop significantly. I'll have to continue doing it for, I think, to have probably the remainder of the president's term, just to make sure that the waste and fraud that we stop does not come roaring back. So, Musk basically said he would cut back his work for President Trump to a day or two a week. Now, interestingly enough, Musk has previously said that he would not do that. join his company's earnings calls unless he had something to say. And well, this time around, he definitely had something to say.

Not on the ragged at your death, not even close. So, you know, there are some challenges. And I expect that this year will be, there'll probably be some unexpected bumps this year. He's been getting a lot of criticism for his work with Doge. Remember, this is the body. responsible for showing thousands of federal government employees the door within the first month of Trump's presidency. On its website, it claims that its cuts have led to an estimated $160 billion in savings.

Meanwhile, over the same stretch, Tesla has lost roughly $600 billion in market cap. Now, the good news for Tesla is that masks little announcements seem to have worked, at least in the short term. The automaker's shares rose nearly 8% on Wednesday. But it's going to take a lot more than that to undo all the damage of the past year. Next up, the unraveling of Blue Smart. Earlier this week, Blue Smart informed customers that it was temporarily pausing operations. Now, we could talk about what Seby discovered in its investigation or the arcane methods of how Blue Smart's founders orchestrated the scheme, but frankly, that is far less interesting.

Instead, it's the broader response to this that's much more fundamental. talk about. The response to news about the Blue Smart collapse has been strikingly consistent. In some ways, Indian businesses, start-ups and media personalities have built and monetized a content economy that's ultimately conformist, unremarkable and post-hawk. Praveen Gopal-Krishnan explores how in this week's The NutGrav. Check it out. Within hours of the Sebi order, thousands of full-time employees at companies opened LinkedIn on one tab, fired up chat GPT on the other and wrote bullet-pointed, neatly sectioned, lessons, takeaways, and cautionary tales about what Blue Smart's fall meant for the rest of us.

The takes was startlingly indisputable. Corporate governance is important. Blue Smart was loved by customers. Instances like this will hurt legitimate businesses. India is a low-trust society. This is a reality check for the ecosystem. systemic issues, structural problems, trust is everything, and of course there's a stupid AI-generated image attached to the post.

There were responses from other founders who said equally tried things. Aman Gupta, co-founder and CEO of Boat, wrote his incontestable opinion about the Blue Smart saga. Quote, build not just fast but right. Close quote. path-breaking. As if the alternate was what everyone else was doing. Sabir Bhatya, co-founder of Hotmail, wrote that the media, quote, shouldn't vilify all founders over one case. Close quote.

As if India's business media has ever preemptively vilified a single startup founder over any case, any time, anywhere. Who exactly is disagreeing with any of these opinions? Then there are the, I guessed as much, but I chose to say nothing opinions. Lesser known CEOs came out of the woodwork to say, I always thought something was off about Blue Smart. V-C stopped recording their techno-euphoria podcast with their portfolio founders for a moment to say, they came to me for funding, but I passed. Again, nobody can corroborate or disagree with any of this.

In some ways, Indian business startups and media personalities have been, built and monetized a content economy that's ultimately conformist, unremarkable and post hoc. YouTube channels talk about master strokes and genius plans of companies only after the event and almost never before. VCs and founders sit together and talk about how the future market for their businesses are going to be wonderful and amazing. One random company releases a studio Ghibli image generator and in a few hours everyone is in all the trend. The discourse on Indian startups is to be as non-controversial as possible. When everyone agrees that something is on the way up, people rush to make content about it. And suddenly, overnight, when it becomes apparent that the thing is on its way down, everyone jumps on it to make content about it.

The smart ones make money across both sides of the curve up and down. All content is created on uncontestable things. things. All monetization and status comes from saying things nobody can disagree with. The unfortunate part of this is that I don't expect any of this to change. Just take Blue Smart. Blue Smart was an organization that was clearly involved in some shady stuff. And yet, think about all the people who probably guessed that something was off about Blue Smart but didn't say a word about it. I'm not even expecting Blue Smart's co-founders, members or VCs to speak up.

But I'm finding it hard to imagine why there wasn't one YouTube content creator, one newsletter writer, or one LinkedIn poster who suggested in the last year that maybe Blue Smart isn't such a great business after all. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted by Rahil Filippos and edited by Rajiv Sien.