India's Tata seeks control of Haldiram's, snack maker wants $10 bln valuation -sources

Bikaji Foods International

06/09/2023 11:25

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      Haldiram's a household name for snacks and sweets in India
    

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      Tata concerned valuation sought is too high - sources
    

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      Tata wants to expand consumer portfolio -sources
    

  
 (Adds closing stock price paragraph 5; financials paragraph 18)
    By M. Sriram and Aditya Kalra
       MUMBAI/NEW DELHI, Sept 6 (Reuters) - Tata Group's
consumer unit is in talks to buy at least 51% of popular Indian
snack food maker Haldiram's but is not comfortable with the $10
billion valuation sought, two people briefed on the matter said.
    If successfully concluded, a deal would see the Indian
conglomerate directly compete with Pepsi  PEP.O  and billionaire
Mukesh Ambani's Reliance Retail.
    Haldiram's, a household name in India, is also talking with
private equity firms including Bain Capital about the sale of a
10% stake, they said.
    Tata Consumer Products  TACN.NS , which owns UK tea company
Tetley and has a partnership with Starbucks  SBUX.O  in India,
has baulked at the $10 billion valuation given that Haldiram's
annual revenue is around $1.5 billion, the sources said.
    Tata Consumer shares surged and closed nearly 4% higher in
Mumbai trade after Reuters reported news of the talks.
    A third person with direct knowledge of the discussions said
Tata wants to buy more than 51% but has told Haldiram's that its
"ask is very high."
    The potential acquisition represents an exciting opportunity
for Tata, the person said, adding: "Tata (Consumer) is seen as a
tea company. Haldiram's is huge in the consumer space and has a
wide market share." 
    The sources spoke on condition of anonymity.
    A spokesperson for Tata Consumer Products said it "does not
comment on market speculation". Haldiram's Chief Executive
Krishan Kumar Chutani and Bain declined to comment.
    Family-run Haldiram's traces its origins back to a tiny shop
founded in 1937 and is well-known for its crispy "bhujia" snack
sold for as little as 10 rupees across mom-and-pop stores.
    It has almost 13% share of India's $6.2 billion savoury
snack market, according to Euromonitor International. Pepsi,
famous for its Lay's chips, also has around 13%.
    Haldiram's snacks are also sold in overseas markets like
Singapore and the United States. The company has around 150
restaurants selling local food, sweets and western cuisine.
    Purchasing Haldiram's would significantly expand Tata's
consumer products reach.
    "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, which also sells salt, pulses and
mineral water, had revenue of $1.7 billion in the past financial
year. It is a relatively small part of the Tata Group, whose
businesses span autos, aviation and hotels and which had
combined revenue last year of some $144 billion.
    Haldiram's Chairman Manohar Lal Agrawal last year told CNBC
TV18 in an interview the company wanted to attract private
equity investors and debut on the stock market in 2-3 years.
    Haldiram's - which has multiple registered companies in the
country - had revenue of at least $981 million in the financial
year ended March 2022, according to regulatory filings. The
first two sources, however, said 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,
sources said.
  
        Haldiram's smaller listed rival in India, Bikaji Foods
International  BIKA.NS , has a market capitalisation of $1.5
billion, six times its annual revenue. Shares in Bikaji also
rose on Wednesday, climbing around 3% during trade.
  

 (Reporting by M. Sriram and Aditya Kalra; Additional reporting
by Chris Thomas Editing by Edwina Gibbs, Alexandra Hudson)
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