PepsiCo eyes stake in Balaji Wafers as competition hurts

PepsiCo Inc, the world's largest snack-food maker, is exploring a bid for smaller local rival Balaji Wafers Pvt Ltd as the MNC looks for a larger market share in developing countries.

Sources familiar with the matter said the US foods giant is expected to buy up to 25 per cent stake in the Indian company.

Although PepsiCo and rival Coca-Cola Co are vying for a bigger chunk of developing countries' business, PepsiCo hasn't submitted an offer and a deal is still in the works.

Sources said the deal is expected to value the company at four to six times its current turnover of about Rs 1,000 crore, adding that the deliberations are private.

Balaji, based in Rajkot in Gujarat, manufactures and distributes potato chips and other grain-based bagged snacks.

The company is also in talks with strategic investors and private equity firms, including Blackstone Group and Actis, for raising funds.

Reports quoting sources at Balaji, however, said PepsiCo had approached the company last year with offer to buy 40 to 100 per cent stake and that the two have been in talks since then.

While a deal is likely in the next two-three months, there is no surety that the deal will go through, the sources pointed out.

PepsiCo, which bought out its joint venture partner Lehar Foods in 1994, has been facing stiff competition from local players such as Mumbai-based Parle, New Delhi-based DFM Foods (owner of 'Crax'), Nagpur-based Haldirams, Hyderabad-based Balaji foods, A-Top Foods, based in Morbi (Gujarat), Ahmedabad's Bikanerwala Foods and, more recently, FMCG major ITC (with its Bingo range).

PepsiCo, which owns brands such as 'Kurkure' and 'Lays', has been losing its market share in the more than Rs 10,000 crore Indian savoury market amidst stiff competition from existing and emerging players.

Balaji Wafers, set up in 1974 by the Virani family, supplies packaged food products across Gujarat, Maharashtra, Madhya Pradesh and Rajasthan. Balaji Group has 90 per cent share of the wafer market and 70 per cent share of namkeen market in Gujarat.

The company now sells its products in 400,000 to 500,000 stores in Western India and its wafers and snacks sold in pouches for as little as Rs5 (8 cents) through neighbourhood mom-and- pop stores and supermarkets are a real threat to the food majors.

Balaji has set up a plant covering over 85,000 sq. m. area in the outskirts of Rajkot city. Its turnover touched the crore rupees mark.

Balaji is reported to be now seeking a partner who will invest funds and help it expand operations.