Many global investors have been vying to buy a stake in the cash-rich and profitable company which has a long legacy of manufacturing the iconic Indian savoury snack, Bikaneri bhujia. Early this month, Bloomberg reported based on information from sources that Temasek Holdings Pte. was in talks to buy a minority stake in Haldiram, a transaction that would have valued India’s biggest snack maker at about $11 billion.
ET had reported a few months ago that Bain Capital had teamed up with Singapore’s Temasek to compete with Blackstone-led consortium for a controlling stake in Haldiram as large buyout funds vied for what could be the largest private equity acquisition in India so far. The Bain and Temasek combination submitted a non-binding offer in May, valuing India’s largest snack and convenience foods company at $8-8.5 billion (Rs 66,400-70,500 crore), after initially engaging with the founding family of the 87-year-old brand separately, people aware of the matter had told ET. Earlier, ET had reported that Blackstone, the world’s largest private equity fund, had teamed up with Abu Dhabi Investment Authority (ADIA) and Singapore sovereign wealth fund GIC for a bid to acquire up to 76% of the company. “The biggest problem in this transaction is the size and the premium expectation by the Agarwal family,” a PE executive who had evaluated the deal but passed on it, had told ET in May.
Crunchy business of Haldiram
Haldiram is engaged in the manufacturing and distribution of 500 types of products such as snacks, namkeen, sweets, ready to eat and pre-mixed food, cookies, non-carbonated ready-to-drink beverages and pasta. It has operations in 100 counties, many through franchisees, including the UK, US and Japan. It has also diversified into several sub brands such as Minute Khana, Cup Shup, Cookie Heaven and forayed into chocolates under the Cocobay brand in January.
It’s expanding into retail supermarkets and quick-commerce platforms to take on incumbents such as Britannia in cookies and Mondelez and Amul in chocolates. Other smaller brands that it has acquired include Babaji Namkeen, Akash Namkeen and Atop Foods.
People familiar with Haldiram’s operations had told ET in May that the FY24 revenue of the combined snacks business was estimated to be Rs 14,500 crore with an ebitda of Rs 2,300-2,500 crore. The business has seen a compound annual growth rate of 18% in revenue over the past five years. The average ebitda margin is 14-15% though last year it improved to 17-18% on account of low commodity rates and price hikes in FY23.A merger is under way between the Nagpur and Delhi factions as part of a plan approved by the National Company Law Tribunal. It’s expected to get completed in the next three-four months. The Competition Commission of India (CCI) had approved the merger last April. Any transaction is conditional upon the successful merger.
The global craving for Haldiram
Since 2016-17, several global private equity firms including General Atlantic, Bain Capital, Capital International, TA Associates, Warburg Pincus and Everstone have been talking with the Agarwal family for a minority stake or a controlling one.
In 2018-19, for over a year, the family held negotiations with Kellogg’s, then the world’s second largest snack foods maker, for selling a controlling 51% stake at a $3 billion valuation, excluding the restaurant business, but kept changing the deal contours which led to the US company eventually walk away exasperated.
Prior to that, PepsiCo’s Indra Nooyi had courted the Agarwals, seeking a buyout. Last September, Reuters reported that Tata Consumer Products Ltd was engaging with the Agarwal family to buy a 51% stake but baulked at the $10 billion price tag. Both companies officially denied the news. “Now the merger coming to fruition and a professional CEO on board, chances of a transaction are more real than ever,” a snack food industry veteran had told ET in May. “The next generation is not keen to pursue the business with the same vigour and passion and that is another trigger but the family is very finicky on a premium valuation. Finally, valuing unlocking via listing the business is also an option as the public market will value the operations much more than private equity would.”
India’s savoury snacks market is hot
While Haldiram dominates the snacks market, other players include PepsiCo’s (Lays, Kurkure), Balaji Snacks, Prataap Snacks (Yellow Diamond), Bikanervala, Bikaji Foods, which recently got listed, and ITC Foods, which sells chips under the Bingo franchise.
A Frost & Sullivan report estimated India savoury snacks market is valued at Rs 72,800 crore in 2021 and is expected to reach Rs 1,19 lakh crore by 2025 at 13% CAGR. Indian savoury snacks market can be broadly segmented into western snacks and traditional snacks with the latter contributing around 48% to the total savoury snacks market — namkeens, bhujia and ethnic snacks such as dry samosa, kachori, chakli, etc.
Despite 43.4% of the packaged savoury snacks market being unorganized, organized players such as Haldiram, Pepsico-Lays, Balaji, Bikaji have a strong foothold across the country and major market share in regional pockets. The organized savoury snacks market is estimated at Rs 41,000 crore in 2021. Currently, the ethnic namkeen and snacks market is valued at Rs 10,800 crore. This segment has grown immensely since the last few years and majorly since pandemic.
