Tata Group’s consumer unit is planning to seek control of snack food maker Haldiram by buying at least 51 per cent stake in the company. According to media reports, Haldiram has proposed a valuation of $10 billion but the Tata Group is not comfortable with the sought valuation.
However, if the deal is successful, it would see the Indian conglomerate directly compete with Pepsi (PEP.O) and billionaire Mukesh Ambani's Reliance Retail. Haldiram's is also talking with private equity firms including Bain Capital about the sale of a 10 per cent stake, according to media reports.
Tata Consumer Products, the owner of Tetley and Starbucks' partner in India, is hesitant about the $10 billion valuation of Haldiram's, which has an annual revenue of about $1.5 billion, according to sources. Following the Reuters report on the discussions, Tata Consumer shares saw a nearly 4 per cent increase in Mumbai trading.
Tata aims to acquire over 51 per cent of Haldiram's but has communicated to them that their asking price is quite high. This potential acquisition is an enticing opportunity for Tata, given their tea-focused image, while Haldiram's holds a significant market share in the consumer space.
Family-run Haldiram's was founded in 1937 and is sold for as little as 10 rupees across mom-and-pop stores. It has almost 13 per cent share of India's $6.2 billion savoury snack market, according to Euromonitor International.
"If you want to suddenly grow big in size, no one better to provide access than Haldiram's. No other brand attacks packaged food, and food services, with equal panache," said Ankur Bisen, head of consumer and retail at Indian consultancy Technopak. Tata's consumer unit recorded a revenue of $1.7 billion in the past financial year. It is a relatively small part of the Tata Group, whose businesses had a combined revenue last year of around $144 billion.
Haldiram's had revenue of at least $981 million in the financial year ended March 2022, according to regulatory filings. However according to other sources, its revenue is now close to $1.5 billion and annual operating profit is around $200 million. The $10 billion valuation sought by Haldiram's for the deal translates to 6.6 times its annual revenue of $1.5 billion.