A pan-India presence, mixed with the equity of an 87-year-old-brand made Haldiram’s a home-grown favourite across generations. Combining that with consistent revenue growth and healthy ebitda despite the cyclicality of the raw material prices, and Haldiram Snacks becomes an irresistibly spicy and mouth-watering proposition for PE buyout groups like Blackstone and Bain, among others.
It helps that they have scale far beyond competition. The majority of Haldiram’s peers are still regional players, dominant in just three or four states. For the listed Bikaji Foods, three states (Rajasthan, Assam, Bihar) contribute 70%+ of revenues.
Gopal Snacks, which listed recently, gets 80%+ of its revenues from just one, Gujarat. Most unorganised players have a strong distribution reach in just a few districts and drives volumes on prices and better retailer margins.
There is still enough scope for them to penetrate deeper into southern and eastern states. By merging the north and west operations, Haldiram’s can become a market leader that would be almost impossible to catch up to.
Even today, the combined sales of the Delhi and Nagpur factions are higher than MNC giants like PepsiCo’s snack sales in the country, making it the leader in a highly fragmented market.
A family sized biz
Haldiram’s snack food business manufactures and distributes 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.
Compared to other categories this sector still has not seen the full effect of premiumisation. Most of the growth is still driven by value driven impulse and discounted family packs. The slow conversion from unorganised to organised should help all large players.
For several snacks’ players, the export contribution is in the region of 5-10%, however it is growing well. As some of these companies increase their international physical presence, there is enough scope for higher growth with a better margin profile. Players like Dabur and Marico have demonstrated success in their global businesses.
Over the years, Haldiram’s has realised the power of the Indian diaspora and today has operations in 100 counties, many through franchisees, including the UK, US and Japan. The export focus derisks the company, making it even more palatable.
It has also diversified into several sub brands including Minute Khana, Cup Shup, Cookie Heaven. It forayed into chocolates with the Cocobay brand in January.
It’s also expanding into retail supermarkets and quick-commerce platforms to take on incumbents such as Britannia in cookies, and Mondelez and Amul in chocolates. With acquisitions of smaller brands — Babaji Namkeen, Akash Namkeen and Atop Foods – it is filling the gaps in its already wide portfolio.
Numbers to munch
According to people familiar with Haldiram’s, the FY24 revenue of the combined snacks business is expected to be INR14,500 crore with an ebitda between INR2,300 and INR2,500 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.
One of the key advantages of this sector has been the ‘large topline’ which most players enjoy which aids in going public. A relatively smaller player like Gopal Snacks with around INR1300 crore topline could launch a INR650 crore IPO as several retail Indian investors still value topline as scale of business.
Among peers, the two key players – Bikaji Foods and Prataap Snacks – quote at multiples that reflect their differing historical track record, as well as margins and returns profile. While the former quotes at roughly 6X revenues and 45XEV/ebitda, the latter is at 1.3X revenues and around 16-17X EV/ebitda.
Haldiram’s being privately held, the financials are not readily available. But going by the non-binding bids, at USD8 to USD8.5 billion valuation, bidders are looking at a 28-30X forward ebitda for this rare opportunity, that too in the much sought after consumer segment.
As Chocolate and confectionery maker Mondelez International Inc highlighted in their 5th State of Snacking report released in March this year: “While new middle-class consumers aspire to spend more on well-known international brands and products, they often stick to their local traditions and preferences especially for food ingredients and flavours, with 40% of young consumers in India stating they prefer traditional and familiar food.”
The global report, which tracked consumer snacking habits through 2023, also noted that “new entrants to the global middle class – mostly young urban professionals in Asia – trade up to higher-quality goods that reflect a certain lifestyle and status, including food and snacks.”
Source : ET
