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Tata Group's Ambitious Bid: Can It Snack on Haldiram's $10 Billion Valuation

Tata's Taste for Transformation, A $10 Billion Snack Food Gamble

6 September 2023


Kunal Tyagi

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  • Tata Group's consumer unit is in negotiations to acquire a minimum 51% stake in Haldiram's, a renowned Indian snack food manufacturer, though the $10 billion valuation is a point of contention.

  • Haldiram's is also exploring a 10% stake sale to private equity firms, including Bain Capital, amidst talks with Tata Group.

  • Tata Consumer Products is hesitant about the valuation, given Haldiram's $1.5 billion annual revenue, but views the acquisition as an opportunity to diversify its portfolio beyond its tea-centric image.

Tata Group's consumer unit is currently engaged in negotiations to acquire a minimum of 51% of the renowned Indian snack food manufacturer, Haldiram's. However, the stumbling block in these discussions lies in the hefty $10 billion valuation that Haldiram's is seeking for the deal. Two individuals familiar with the matter shared this information with Reuters, shedding light on the potential acquisition that could see Tata Group venture into direct competition with giants like Pepsi and Mukesh Ambani's Reliance Retail.

Haldiram's, a household name in India, is also exploring alternative options, including discussions with private equity firms such as Bain Capital, regarding the sale of a 10% stake in the company. Tata Consumer Products, which boasts ownership of UK tea company Tetley and maintains a partnership with Starbucks in India, has expressed reservations about the proposed $10 billion valuation. This skepticism arises mainly because Haldiram's annual revenue currently stands at approximately $1.5 billion, according to the sources.

News of these talks triggered a positive response in the stock market, with Tata Consumer shares surging more than 4% in late Wednesday trading in Mumbai, following Reuters' report on the negotiations. A third source, privy to the discussions, disclosed that Tata is interested in acquiring more than 51% of Haldiram's but has communicated its concerns regarding the exorbitant asking price. This potential acquisition is seen as a significant opportunity for Tata Consumer Products to diversify its portfolio, considering that it is primarily known as a tea company, while Haldiram's enjoys a substantial presence in the consumer food sector.

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It's worth noting that both Tata Consumer and Haldiram's declined to comment on these ongoing talks. In a clarification to stock exchanges, Tata Consumer stated that it "is not in negotiations as reported." However, it emphasized the company's commitment to evaluating strategic growth opportunities, which it periodically announces in accordance with regulatory obligations. Haldiram's, a family-run business dating back to its humble beginnings in 1937, has become synonymous with its popular "bhujia" snack, available for as little as 10 rupees at mom-and-pop stores across India. The company has captured nearly 13% of India's $6.2 billion savory snack market, putting it on par with Pepsi, renowned for its Lay's chips.

Acquiring Haldiram's would mark a significant expansion of Tata's consumer product footprint, catapulting it into a more prominent role in the Indian snack food industry. Tata's consumer unit, which also deals in products like salt, pulses, and mineral water, reported revenue of $1.7 billion in the past financial year. Nevertheless, it represents just a fraction of the broader Tata Group, an industrial conglomerate with interests spanning automobiles, aviation, hotels, and a combined revenue exceeding $144 billion in the previous year.

Haldiram's Chairman, Manohar Lal Agrawal, previously expressed the company's intention to attract private equity investors and make a stock market debut within the next 2-3 years. Although regulatory filings for the fiscal year ending March 2022 indicated a revenue of at least $981 million for Haldiram's, the sources suggest that the company's revenue has since climbed to approximately $1.5 billion, with an annual operating profit hovering around $200 million. This promising growth trajectory adds to the allure of the potential deal between Tata Group and Haldiram's, setting the stage for a transformative move in the Indian consumer market.

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