Indian snacks maker Haldiram’s is negotiating to acquire a major share in listed rival Prataap Snacks, valued at $350 million, which aims to set foot into the potato chip market. Prataap Snacks shares in Mumbai surged when the news broke, hitting their peak since 2018 and closing up nearly 9.7%.
The discussions are in their infancy and have not revolved around a valuation, which could be above the price of Prataap’s stock. Sources said Haldiram’s is looking at a stake of over 51% but no final figure has been decided.
Prataap is mainly recognized as the owner of Yellow Diamond brand chips competing with Pepsi’s Lay’s and other snack producers in a market dominated by local, unstructured food vendors selling fried chipped products.
Peak XV Partners, previously known as Sequoia Capital India holds up to 47% of the shares in Prataap Snacks and is planning a full exit from its stake in Prataap. However, Haldiram’s CEO Krishan Kumar Chutani, Prataap CEO Amit Kmat, and Peak XV did not respond.
In 2017, Prataap made its debut in the stock market with revenues of about $200 million last year. It notes that it moves over twelve million packets of its salty products per day, with the lowest price being as little as five rupees (6 U.S) cents.
On the other hand, Haldiram’s a non-listed family-owned business that was established in 1937 is a much larger manufacturer of packaged snacks with revenues of more than $1 Billion and runs as many as about one hundred fifty restaurants across the country. Last year, however, Reuters said the company was targeting a $10 billion valuation in discussions with conglomerate Tata Group and other strategic investors it sought to bring on board but talks failed due to pricing issues.
Haldiram will tap the potato chips segment through a deal (with Prataap). People usually prefer Western-flavored snacks as opposed to local ones, said one of the sources.
Prataap has 14 manufacturing plants located in nine Indian states. Given the vast array of small not organized firms in this area, branded products have grown at a tremendous rate owing to health awareness and growth in disposable income. On Dec. 19, the Indian Moneycontrol news website reported that the founders of Prataap and Peak XV were looking to sell stakes in their company interest groups and investors but did not name buyers.
One of the local snack providers that have stayed competitively ahead over inflationary concerns and competition in India’s price-conscious markets is Prataap, whose stock is yet to recover after listing three years ago. In its November earnings report, Prataap estimated the Indian snacks market at $5.2 billion with an annual growth of 14%.
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