According to two persons briefed on the situation, the consumer division of Tata Group is in talks to acquire at least 51% of iconic Indian snack food producer Haldiram’s but is uneasy with the $10 billion valuation demanded.
The Indian company would immediately compete with Pepsi (PEP.O) and Mukesh Ambani‘s Reliance Retail if a merger were to be successfully finalised.
A 10% stake sale from Haldiram’s, a well-known brand in India, is reportedly being discussed with private equity groups like Bain Capital.
Given that Haldiram generates about $1.5 billion in yearly revenue and that Tata Consumer Products (TACN.NS), which owns the UK tea business Tetley and collaborates with Starbucks (SBUX.O) in India, baulked at the $10 billion valuation, the sources claimed.
Following news of the talks from Reuters, Tata Consumer shares increased more than 3% in late Wednesday trade in Mumbai.
According to a third individual with firsthand knowledge of the conversations, Tata wants to purchase more than 51% of Haldiram’s shares but has informed Haldiram’s that their “ask is very high.”
According to the source, the prospective acquisition offers Tata an intriguing opportunity. They continued, “Tata (Consumer) is thought of as a tea firm. Haldiram’s is enormous and dominates the consumer market.
The sources requested anonymity in order to speak.
Tata Consumer Products “does not comment on market speculation,” according to a spokeswoman. Krishan Kumar Chutani, the CEO of Haldiram, and Bain declined to comment.
The family-run Haldiram’s chain has its roots in a small shop that opened in 1937. It is well-known for its crispy “bhujia” snack, which can be bought in mom-and-pop shops for as little as 10 rupees.
According to Euromonitor International, its market share in India’s $6.2 billion savoury snack market is approximately 13%. Pepsi, known for its Lay’s potato chips, has about 13% as well.
Snacks made by Haldiram are now offered in international markets like Singapore and the US. The company operates 150 restaurants that serve regional fare, sweets, and western food.
The reach of Tata’s consumer goods would be greatly increased with the acquisition of Haldiram’s.
There is no better place to gain admission to if you wish to grow suddenly larger than Haldiram’s. According to Ankur Bisen, head of consumer and retail at Indian consultant Technopak, “No other brand attacks packaged food, and food services, with equal panache.”
The consumer division of Tata, which also distributes salt, lentils, and mineral water, generated $1.7 billion in revenue during the most recent fiscal year. It is a minor component of the Tata Group, which includes companies in the car, aviation, and hotel industries and generated combined sales of over $144 billion in 2017.
Manohar Lal Agrawal, the chairman of Haldiram, stated in an interview with CNBC TV18 from last year that the business aimed to draw in private equity investors and make its stock market debut in two to three years.
According to regulatory documents, Haldiram’s, which has several firms registered in the nation, reported earnings of at least $981 million for the fiscal year that ended in March 2022. However, according to the first two sources, its yearly operating profit is roughly $200 million, and its revenue has now reached close to $1.5 billion.
