Is Haldiram’s really worth $10 billion?
On September 6, reports suggested that Tata Consumer Products was in talks to buy a 51 percent stake in Haldiram’s but was not comfortable with the $10 billion valuation that Haldiram’s had sought. Both companies have since denied being in talks.
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Tata Consumer Products and Haldiram’s may have denied reports that the Tata Group firm is looking to buy a majority stake in the Indian foods and snacks company, but the development has thrown up an important question: Is Haldiram’s really worth $10 billion?
Analysts say Haldiram’s products would be a good addition to the Tata Consumer Products portfolio, which doesn’t have such foods and snacks. However, they have expressed doubts if the business is actually worth $10 billion.
On September 6, Reuters reported that Tata Consumer Products is in talks to buy a 51 percent stake in Haldiram’s but was not comfortable with the $10 billion valuation that Haldiram’s had sought.
Tata Consumer Products denied the news in an exchange filing, saying it was not in any negotiations for such a deal. Haldiram’s, too, denied being in talks with Tata Consumer, in an interaction with CNBC-TV18.
The Competition Commission of India had in April approved the demerger of the FMCG businesses of Haldiram Foods International Private Limited and Haldiram Snacks Private Limited into a newly created entity called Haldiram Snacks Foods.
Analysts say that it was the combined entity that was to be acquired by Tata Consumer Products.
Haldiram’s snacks could boost Tata portfolio, but costly at 10x sales
Haldiram Foods International Private Limited had a revenue of Rs 3,622 crore in FY22, whereas Haldiram Snacks Private Limited had a revenue of Rs 5,248 crore in FY22. The revenue of the merged entity in this case becomes Rs 8,870 crore.
This puts Haldiram’s reported valuation at 10 times the FY22 sales of its business, which is around Rs 83,000 crore, analysts confirmed. On the other hand, Bikaji Foods has a market cap of Rs 12,864 crore, which makes it 6.5 times of the FY23 sales.
“A $10 billion valuation for Haldiram is a lot,” said an analyst at a domestic brokerage, requesting anonymity, since the company is not publicly traded.
“A $10 billion valuation is high, and it is not justified for Haldiram’s,” added an analyst at a foreign brokerage firm, requesting anonymity.
Tata Consumer Products’ portfolio does not have many products in the snacking segment, except for Soulfull’s ragi bites and protein bar. If Haldiram’s business were to be acquired, it would have been a great addition to the company’s portfolio, said the foreign brokerage analyst. Building such a portfolio wouldn’t be possible if the Tata Group company had to start building its own snack brand, the analyst added.
Industry overview
Haldiram’s is the market leader in the Indian ethnic and snacks industry with a 38.5 percent share. As of FY22, this industry was worth Rs 114 billion and expected to grow to Rs 204 billion by FY26, according to Bikaji Foods’ red herring prospectus. Bikaji Foods—it listed in November 2022—and Haldiram’s belong to the same family group. While Bikaji Foods has a presence in Rajasthan, Assam, and Bihar, Haldiram’s has pan-India operations, with a major presence in New Delhi.
Tata Consumer Products’ stock fell 2.72 percent on September 7, paring the previous day’s gains after the company denied any negotiations with Haldiram’s.
