Multibagger Stock: Mukesh Ambani-backed small-cap surges 400% in 4 months, 5,062% in 3 years

Stock market investing can offer significant rewards with prudent stock selection, but it also carries risks if decisions are not made wisely. Fortunately, shareholders of Lotus Chocolate Company have reasons to rejoice, as the shares of this Reliance Industries-backed company have provided outstanding returns in recent years.

The company's shares have surged 5,062% to the current market price of ₹1,807 apiece from ₹35 in September 2021. A major chunk of the gains has come in the last four months, with the stock surging by 404%. Notably, the upward momentum in shares began after Reliance Consumer Products (RCPL), the FMCG arm of Reliance Retail Ventures (RRVL), acquired a 51% stake in the company for an aggregate consideration of ₹74 crore in March 2023. 

RRVL, a subsidiary of Mukesh Ambani-led Reliance Industries, serves as the holding company for all retail businesses under the Reliance group. 

Lotus Chocolate is one of India’s select manufacturers of the finest chocolates, cocoa products, and cocoa derivatives. Its products are supplied to chocolate makers and chocolate users across the country, from local bakeries to multinational companies.

The chocolates and confectionery industry is estimated to exceed ₹25,000 crore in consumer spending, with chocolates making up approximately two-thirds of the market and confectionery accounting for around one-third.

The industry is projected to grow to over ₹35,000 crore over the next four years, reflecting a CAGR of 10%. The chocolate category is predominantly controlled by international players—such as Mondelez, Nestlé, Ferrero, and Mars—who together hold an 85% market share. Indian companies have only recently begun to gain traction, with Amul being the largest domestic player.

Strategic focus

In recent years, the chocolate category has experienced significant premiumisation, creating a gap in the affordable segment. In its FY24 annual report, the company stated that this presents a substantial opportunity to develop its brands that provide high quality at accessible price points.

In the B2B space, the rising trend of home bakers and increased consumption of chocolate-based products present substantial opportunities, particularly within the retail and HoReCa (Hotels, Restaurants, and Cafés) channels, which the company aims to capitalise on.

However, rising global cocoa prices have led to a significant increase in input costs, a trend expected to continue in the foreseeable future. This increase may impact consumer prices in the category, potentially affecting volume growth; nevertheless, the outlook for value growth remains positive.

The company remains focused on strengthening its B2B business while simultaneously building its presence in the B2C segment through an omnichannel distribution strategy and a product portfolio that spans key categories.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.