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The snack saga: Haldiram’s potential acquisition of Prataap Snacks
Discover what the Haldiram-Prataap Snacks deal means for Prataap Snacks and how it could change its future trajectory.

haldiram

In a bold move that is set to send ripples across the Indian snack food market, Haldirams, a household name synonymous with Indian snacks, is reportedly in talks to acquire a majority stake in Prataap Snacks, the maker of the popular Yellow Diamond chips. 

This potential acquisition is more than just a business deal; it is a statement of intent from Haldirams, signalling a strategic shift that could reshape the snack industry landscape. 

There will be significant repercussions, impacting not just the two companies involved, but the entire market. This article delves into the details of this exciting development, exploring its potential impact and what it could mean for the future of snack foods in India.

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Details of the deal

Reportedly, leading Indian snack manufacturer Haldiram’s is conversing with Prataap Snacks about acquiring a majority stake in the company. Prataap Snacks, an enterprise classified as a snack market competitor, has an estimated market value of $350 million. This acquisition is intended to enhance Haldiram’s standing in the market for potato chips.

An accurate valuation cannot be disclosed at this time because the negotiations are in their early stages. Nevertheless, it is anticipated that the assessment may be higher than the present stock value of Prataap. Haldirams is targeting a minimum of 51% of the ownership interest; however, the precise proportion remains uncertain.

Prataap Snacks, a manufacturer renowned for its Yellow Diamond chips, contends with other snack producers such as Pepsi’s Lay’s brand in a fried chips market segment still dominated by local, unorganised food vendors. 

A venture capital firm called Peak XV Partners is trying to unload all of their shares in Prataap Snacks. They own about 47% of the company.

After disclosing yearly revenues of around $200 million in 2016, Prataap Snacks made its stock market debut in 2017. Daily, over 12 million packets of its salty snacks, priced at a minimum of 5 rupees (6 U.S. cents), are sold. For the year ended March 31, 2023, the turnover of Prataap snacks is ₹1,65,293.22 (₹ lakhs).

In contrast, established in 1937 as a family-run enterprise, Haldirams is a considerably more sizable producer of packaged snacks, boasting a revenue exceeding $1 billion and operating a network of 150 restaurants throughout the country.

Before this, Haldiram was in deal discussions with conglomerate Tata Group and other strategic investors to secure a $10 billion valuation. However, due to valuation concerns, the discussions failed to materialise. By obtaining a stake in Prataap, Haldiram’s could enter the potato chip market, capitalising on consumer inclinations towards snacks with Western flavours as opposed to more regional alternatives.

At present, fourteen manufacturing facilities are managed by Prataap Snacks in nine Indian states. The share price of Prataap Snacks is at ₹1321.10 as of January 20, 2024. In India, smaller unorganised enterprises still hold a significant share of the fried snacks market. 

However, branded products have seen substantial growth recently, driven by health-conscious consumers with increased disposable income for packaged goods. Prataap’s earnings report for November estimates that the snacks market in India is worth $5.2 billion and is expanding at a rate of 14% annually. 

Indian markets have presented challenges for domestic snack manufacturers such as Prataap, due to inflationary forces and intensifying competition. The stock price of Prataap remains in the vicinity of its 2017 listing price.

Also read: Mergers vs. Acquisitions – How are they different from one another?

Impact on Prataap Snacks

Significant consequences for Prataap Snacks may result from Haldiram’s possible acquisition of the former. Here’s a detailed look at the possible impact:

Enhanced market presence: With Haldiram’s vast distribution network and established brand name, Prataap Snacks could see its products reaching a wider audience. It could lead to increased sales and market share.

Financial stability: The deal could provide Prataap Snacks with financial stability, given Haldiram’s strong financial position. It could enable Prataap Snacks to invest more in product development and marketing.

Operational synergies: The acquisition could result in operational synergies, as Prataap Snacks could leverage Haldiram’s supply chain efficiencies, production capabilities, and marketing expertise.

Brand value: An association with a well-known brand like Haldirams could enhance the brand value of Prataap Snacks, making its products more appealing to consumers.

While these are potential benefits, the impact would depend on how the deal is executed and integrated. It is a development that stakeholders of Prataap Snacks shall be watching closely.

Impact on Haldiram

Strategic growth: The acquisition could be a strategic move for Haldiram to accelerate its growth in the snack food market. It could help Haldiram tap into new customer segments that Prataap Snacks caters to with its product range.

Market leadership: By acquiring Prataap Snacks, Haldiram could further solidify its position as a market leader in the Indian snack industry. It could help Haldiram gain a larger market share and strengthen its competitive positioning.

Innovation opportunities: The deal could open up new opportunities for product innovation. Haldiram could leverage Prataap Snacks’ expertise in potato chips to introduce new flavours and products.

Enhanced shareholder value: If the acquisition leads to increased profits and market share, it could strengthen value for Haldiram shareholders.

It’s important to note that these impacts are speculative and the actual results will depend on various factors including the final terms of the deal, integration process, and market response.

Market and financial analysis

In 2023, the Indian snack market was worth a substantial and expanding ₹ 42,694.9 crore. According to projections, it will grow at a CAGR of 9.08% and reach ₹95,521.8 crore by 2032. 

It is estimated that the snack market in India is worth $5.2 billion and is expanding at a rate of 14% annually. 

Increasing implementation of quality standards by the Food Safety and Standards Authority of India (FSSAI), the growing number of e-commerce brands and distribution channels, and the rising popularity of convenient food products are some of the primary factors driving the market.

The Indian snack food market might see a dramatic shift if Haldirams decides to acquire Prataap Snacks. A change in the competitive landscape may result from the combined entity’s commanding market share. 

With the increased market presence, the new entity could have greater bargaining power with suppliers and distributors, potentially leading to cost efficiencies. It could influence the pricing strategies of other players in the market, leading to a more competitive environment.

Furthermore, the deal could stimulate innovation in the snack food industry. The combined R&D capabilities of Haldirams and Prataap Snacks could lead to the development of new products, setting new trends in the market. 

It could influence consumer preferences and drive growth in the snack food market. More investors may be interested in the snack food industry because of the deal, which reflects positively on the future growth prospects. It could lead to more M&A activities, further changing the market dynamics. 

However, these are potential impacts, and the actual outcome will depend on various factors including the final terms of the deal, the integration process, and the market response. These developments could significantly impact the snack market in India, so the investors should keep a close eye on it.

Also read: Amul vs Nandini: The battle of India’s dairy giants

Bottomline

Stepping into the future, the Indian snack market is all set to witness a game-changing move. Haldiram’s potential acquisition of Prataap Snacks is not just a business deal. It is a power play that could redefine the snack food landscape. 

The Indian snack food industry is in for a crunchier ride as potato chips fly off the shelves and into boardrooms. So, as you munch on your favourite snacks, remember that behind every bite could be a story of strategic moves, market dynamics, and business growth. 

Stay tuned, because this snack saga is just getting started!

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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