MUMBAI/NEW DELHI, Sept 6 (Reuters) – Tata Group’s consumer unit is in talks to buy at least 51% of popular Indian snack food maker Haldiram’s but is not comfortable with the $10 billion valuation sought, two people briefed on the matter said.

If successfully concluded, a deal would see the Indian conglomerate directly compete with Pepsi (PEP.O) and billionaire Mukesh Ambani’s Reliance Retail.

Haldiram’s, a household name in India, is also talking with private equity firms including Bain Capital about the sale of a 10% stake, they said.

Tata Consumer Products (TACN.NS), which owns UK tea company Tetley and has a partnership with Starbucks (SBUX.O) in India, has baulked at the $10 billion valuation given that Haldiram’s annual revenue is around $1.5 billion, the sources said.

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

A third person with direct knowledge of the discussions said Tata wants to buy more than 51% but has told Haldiram’s that its “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.”

The sources spoke on condition of anonymity.

A spokesperson for Tata Consumer Products said it “does not comment on market speculation”. Haldiram’s Chief Executive Krishan Kumar Chutani and Bain declined to comment.

Family-run Haldiram’s traces its origins back to a tiny shop founded in 1937 and is well-known for its crispy “bhujia” snack sold for as little as 10 rupees across mom-and-pop stores.

It has almost 13% share of India’s $6.2 billion savoury snack market, according to Euromonitor International. Pepsi, famous for its Lay’s chips, also has around 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.

Purchasing Haldiram’s would significantly expand Tata’s consumer products reach.

“If you want to suddenly grow big in size, no one better to provide access than Haldiram’s. No other brand attacks packaged food, and food services, with equal panache,” said Ankur Bisen, head of consumer and retail at Indian consultancy Technopak.

Tata’s consumer unit, which also sells salt, pulses and mineral water, had revenue of $1.7 billion in the past financial year. It is a relatively small part of the Tata Group, whose businesses span autos, aviation and hotels and which had combined revenue last year of some $144 billion.

Haldiram’s Chairman Manohar Lal Agrawal last year told CNBC TV18 in an interview the company wanted to attract private equity investors and debut on the stock market in 2-3 years.

Haldiram’s – which has multiple registered companies in the country – had revenue of at least $981 million in the financial year ended March 2022, according to regulatory filings. The first two sources, however, said its revenue is now close to $1.5 billion and annual operating profit is around $200 million.

The $10 billion valuation sought by Haldiram’s for the deal translates to 6.6 times its annual revenue of $1.5 billion, sources said.

Haldiram’s smaller listed rival in India, Bikaji Foods International (BIKA.NS), has a market capitalisation of $1.5 billion, six times its annual revenue. Shares in Bikaji also rose on Wednesday, climbing around 3% during trade.

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