Three major private equity (PE) firms - Blackstone, Temasek Holdings, and Bain Capital - are considering acquiring a controlling stake in Haldiram Snacks Food Pvt. Ltd (HSFPL), according to multiple sources familiar with the matter. The investors are looking to purchase at least 51% of the company at a valuation of USD 8-10 billion. The end goal would be to take the company public, the source added.

The deal structure is currently being worked out, and the funds are conducting due diligence. The transaction, if completed, would be one of India's largest private equity deals in the consumer sector and is an indication of the deepening of the Indian market.

Last year, Tata Group's consumer unit was in talks to buy at least 51% of HSFPL at a valuation of USD 10 billion. Tata Consumer Products, which owns UK tea company Tetley and has a partnership with Starbucks in India, was negotiating the stake purchase.

The present deal follows the merger of Haldiram's Nagpur and Delhi divisions, which the Competition Commission of India approved last year. As part of the reorganization, the FMCG businesses of Haldiram Snacks Pvt. Ltd (HSPL) and Haldiram Foods International Pvt. Ltd (HFIPL) were demerged into the new entity Haldiram Snacks Food Pvt. Ltd (HSFPL), where existing shareholders of HSPL and HFIPL hold 56% and 44% stakes respectively.

The Delhi business was primarily run by Manohar Agarwal and Madhu Sudan Agarwal, while the Nagpur part of the family was led by Kamalkumar Shivkisan Agrawal, grandsons of Haldiram founder Ganga Bhishen Agarwal, who started the business in 1937. Starting out as a small family-owned sweetshop business, Haldiram today comprises more than 400 varieties of namkeen, confectionery and ready-to-eat food now sell across 100 countries. The company also has around 150 restaurants selling local food, sweets and western cuisine.

Haldiram sells snacks, namkeen, sweets, ready to eat / pre-mix food, frozen food, biscuits, non-carbonated ready to drink beverages, pasta, etc. The group has a diverse presence in India and exports to various countries outside India, including the USA and Europe. The brand has significant traction in India and is synonymous with salty snacks and savory foods. It was one of the early entrants in creating this category, so it is likely to attract strong investor interest.

In the Indian snack and savoury segment, Haldiram?s competes with Conagra Brands, Balaji Wafers, Bikanervala Foods, ITC, Parle Products? PepsiCo, Prataap Snacks, TTK Foods (TTK Healthcare), and Urban Platter, besides many others. Haldiram?s has almost 21% share of India's INR 51,590 crore savoury snack market, according to Euromonitor International. Pepsi, famous for its Lay's chips, has around 15%.

In the year ended March 2023, Haldiram?s snacks sales hit INR 9,215 crore (USD1.1 billion), a 19% increase from a year ago. The revenue of the company is now close to USD 1.5 billion and annual operating profit is around USD 200 million. The USD 10 billion valuation sought by Haldiram?s for the deal translates to 6.6 times its annual revenue of USD 1.5 billion, sources said.

As per a January 2024 report by research firm IMARC Group, the Indian market for snacks reached INR 42,694.9 crore in 2023, and may touch INR 95,521.8 crore by 2032, clocking an annual growth rate of 9.08% during the period. This growth is to be driven by urbanization, rising incomes, and changing lifestyles influenced by western eating habits like ready-to-eat snack options.

The overall snacks market is divided into four sub-segments. Traditional snacks such as namkeen, bhujia and nuts comprise the first while the second includes western ones such as potato chips. Riblon and gathia, sold under brands such as Kurkure, as well as extruded, which includes cheese balls, are the others. Traditional snacks account for nearly half the market, with both multinationals and homegrown companies pushing namkeen into the hinterland with attractive packaging and pricing. Haldiram?s has a presence in nearly all snacking categories.

The Haldiram deal marks the growing attractiveness of India's consumer sector to global investors. If completed, it would facilitate the stock listing of Haldiram?s. However, valuation negotiations and regulatory clearances remain, so the outcome is uncertain. Still, the deal buzz is a sign of the industry's strong fundamentals and future potential as incomes rise in India.