Tata Group's consumer unit is in talks to buy at least 51% of popular snack food maker Haldiram's but is not comfortable with the $10-billion valuation sought, according to a report on Wednesday.

If successfully concluded, a deal would see the Indian conglomerate directly compete with Pepsi and billionaire Mukesh Ambani's Reliance Retail. 

Haldiram’s is also in discussions with private equity firms, including Bain Capital, about the sale of a 10 percent stake, according to the report.

Tata Consumer Products, which owns UK tea company Tetley and has a partnership with Starbucks in India, has balked at the $10 billion valuation given that Haldiram’s annual revenue is around $1.5 billion, said the report quoting the sources.

Tata Consumer shares surged and closed nearly 4% higher in Mumbai trade after Reuters reported news of the talks.

According to a third individual with direct knowledge of the discussions, Tata wants to purchase more than 51% of Haldiram's shares but has informed Haldiram that their "ask is very high."

The potential acquisition represents an exciting opportunity for Tata, the person said, adding: “Tata (Consumer) is seen as a tea company. Haldiram’s is huge in the consumer space and has a wide market share.”

A spokesperson for Tata Consumer Products, according to Reuters, said it “does not comment on market speculation".

Haldiram's is a family-run business that can trace its roots back to a little shop established in 1937. It is best renowned for its crispy "bhujia" snack, which is available in mom-and-pop shops for as little as 10 rupees. According to Euromonitor International, it has a nearly 13% market share of India's $6.2 billion savory snack market. The Lay's chip-famous Pepsi also has about 13%.

Haldiram’s snacks are also sold in overseas markets like Singapore and the United States. The company has around 150 restaurants selling local food, sweets, and western cuisine.

According to regulatory documents, Haldiram's, which has several firms registered in the nation, reported earnings of at least $981 million for the fiscal year that ended in March 2022. However, according to the first two sources, its yearly operating profit is roughly $200 million, and its revenue has now reached close to $1.5 billion.

Image source: Reuter