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Tata Group's consumer division is reportedly in discussions to acquire a majority stake of at least 51% in Haldiram's, a well-known Indian snack food company. However, sources indicate that Tata is not comfortable with the $10 billion valuation that Haldiram is seeking for the deal. If the acquisition goes through, it would position the Indian conglomerate to compete directly with industry giants like Pepsi and Reliance Retail, owned by billionaire Mukesh Ambani.
Haldiram's, a household name in India, is also said to be exploring the possibility of selling a 10% stake to private equity firms, including Bain Capital. Tata Consumer Products, the potential acquirer, which already owns brands like Tetley in the UK and has a partnership with Starbucks in India, has expressed reservations about the $10 billion valuation, considering that Haldiram's annual revenue stands at approximately $1.5 billion, according to insider sources.
In response to the news of the talks, Tata Consumer shares experienced a nearly 4% surge in Mumbai trading. While Tata reportedly seeks to acquire more than 51% of Haldiram, they have conveyed to the snack maker that their valuation demands are considerably high.
This potential acquisition represents a significant opportunity for Tata to diversify its consumer product portfolio. Haldiram's, known for its crispy "bhujia" snack and other popular products, has a substantial share of India's savory snack market, amounting to nearly 13%, putting it on par with Pepsi's Lay's chips in the market share. Haldiram's products are also distributed in international markets like Singapore and the United States, and the company operates approximately 150 restaurants offering a range of cuisines.
For Tata, purchasing Haldiram's would mark a significant expansion in the consumer products sector. While Tata Consumer already sells items such as salt, pulses, and mineral water, the potential acquisition would provide access to a broader consumer base. Tata Consumer reported revenues of $1.7 billion in the previous financial year, although it represents a relatively smaller portion of the overall Tata Group, which spans various industries including automotive, aviation, and hospitality, and posted combined revenue of approximately $144 billion last year.
Haldiram's Chairman Manohar Lal Agrawal had previously expressed the company's intent to attract private equity investments and potentially debut on the stock market within the next 2-3 years. According to regulatory filings, Haldiram reported revenues of at least $981 million for the financial year ending March 2022, but insiders suggest that its revenue has since increased to around $1.5 billion, with an annual operating profit of approximately $200 million. The $10 billion valuation sought by Haldiram translates to 6.6 times its annual revenue of $1.5 billion, sources say.
In a related development, shares of Haldiram's smaller listed rival in India, Bikaji Foods International, also experienced a rise of approximately 3% during trading following the news. Bikaji Foods International currently boasts a market capitalization of $1.5 billion, which is six times its annual revenue.
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