ITC is currently evaluating the acquisition of a 47% stake previously held by Peak XV Partners (formerly Sequoia Capital) in the publicly traded Prataap Snacks, as reported by ET. This comes after unsuccessful talks with Haldiram’s due to a valuation mismatch. Prataap Snacks, renowned for its Yellow Diamond chips and traditional Indian namkeen under the Avadh brand, has piqued the interest of ITC. Additionally, negotiations with listed Bikaji Foods, another major player in the snacks industry, also failed to materialize, according to sources familiar with the matter.
Other buyout funds such as KKR, TA Associates, and Apax have been engaged following Peak XV’s decision to fully divest its nearly 13-year-old investment in Prataap. Peak XV enlisted Deutsche Bank to manage the sale of the company.
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If the transaction succeeds, it will trigger an open offer for an additional 26% of the Indore-based company. Since its stock market debut in 2017, during which it listed at a 33% premium, the company has been underperforming. Prataap closed 1% lower at INR 1,174.45, with a market value of INR 2,802.19 crore on Wednesday.
ITC, renowned for its sale of Bingo chips and namkeen alongside other products, finds Prataap offering substantial leverage in specific regional markets. This is particularly evident where ITC’s own brands struggle to gain traction against formidable local competitors.
An ITC spokesperson said, “We do not comment on market speculation.”
Amit Kumar, the managing director of Prataap Snacks, did not provide any responses to inquiries, nor did TA Associates. KKR opted not to comment.
An email query sent to Peak XV remained unanswered.
As per the FY23 annual report, Prataap Snacks operates a total of 15 manufacturing facilities, with seven being owned by the company itself and eight operated by contract manufacturers.
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According to a report from market research firm IMARC Group, the Indian snacks market was estimated at INR 42,694.9 crore last year, with projections indicating it will more than double to INR 95,521.8 crore by 2032. Despite this rapid growth, the snacking industry remains fragmented and fiercely competitive.
Among the national players are PepsiCo, renowned for marketing Lay’s, Doritos, and Kurkure, alongside ITC, Haldiram’s, Bikaji Foods, Balaji Wafers, Too Yum, and the recent entrant Reliance Consumer Products, which has collaborated with General Mills to distribute Alan’s Bugles snacks.
Private equity funds, on the other hand, are reportedly showing tepid interest due to the company’s lack of growth in the premium segment.
“It operates in the INR 5 segment where the margins are wafer thin. Unless you hit the sweet spot, INR 10 per packet and above, there is not much juice left for a fund to buy a listed company and transform it,” said a PE executive who has been approached. “It’s losing market share and distribution too and it’s an unhealthy category for a PE to bite into.”
In the quarter ended December 2023, Prataap Snacks reported standalone net sales of INR 408.31 crore, up 8% from INR 377.79 crore in the year-ago quarter. The snack maker’s quarterly net profit more than trebled to INR 10.79 crore from INR 3.42 crore. It clocked sales of INR 1,652.93 crore in FY23 and net profit of INR 20.26 crore.
Executives citing NielsenIQ data stated that ITC Foods overtook Britannia, Parle Products, and Britannia to become the country’s largest foods maker in the nine months to September 2023. It clocked food FMCG sales of Rs 17,100 crore in the duration, ahead of Britannia, Adani Wilmar, Parle Products, and Mondelez.
ITC’s portfolio of foods and staples encompasses popular brands such as Yippee noodles, Sunfeast biscuits, Bingo chips, Aashirvaad atta, and MasterChef frozen foods. Similar to Tata Consumer, ITC has also been exploring acquisitions, having acquired Yoga Bar last year.
Chairman Sanjiv Puri’s ITC Next strategy emphasizes a portfolio of products tailored to meet evolving consumer demands. According to insiders, while Yoga Bar represented one aspect of this strategy, ITC is poised to leverage its robust distribution network to promote Prataap’s brand portfolio.
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