Kellogg's joins race for Balaji Wafers

In discussion for possible 10-15% buy in western India entity, say sources, to extend reach

The stake dilution process at Rajkot-based Balaji Wafers is getting warmer, with one more multinational giant in the fray.

According to people in the know, Kellogg's India, the breakfast cereal maker, has started discussions with the management of Balaji for acquiring a 10-15 per cent stake in the wafer maker. The deal size is expected to be Rs 350-400 crore.

Though Kellogg's has a global presence in the wafer business through its buyout of Pringles for $2.7 billion early last year, the latter hasn't been able to make a strong presence in India. The minority stake buyout in Balaji is likely to help Kellogg's India explore the wafers market, those in the know said. "Though Pringles is a high-end brand, (this) entry into the Indian wafers market will help them to push even Pringles in tier-II cities, where the consumption power of people are on the rise," said an investment banker.

WIDENING ITS HORIZON

• Though Kellogg’s has a global presence in the wafer business through its buyout of Pringles for $2.7 billion early last year, the latter hasn’t been able to make a strong presence in India
• According to industry estimates, wafers is a Rs 3,000-4,000 crore market within salty snacks
• The breakfast cereal market is small, largely in the region of Rs 800-900 crore, led by cornflakes, which is a Rs 700-crore segment, dominated by Kellogg’s, which has 60 per cent share

According to industry estimates, wafers is a Rs 3,000-4,000 crore market within salty snacks. Founded in 1976, Balaji Wafers is a strong regional player, with a share of 65 per cent in western India. It has a presence in Gujarat, Maharashtra, Goa, Rajasthan and some parts of Madhya Pradesh. The Rajkot-based company has an annual turnover of Rs 1,000 crore and is looking to close the current financial year with a growth of 25-30 per cent. It is said to be eyeing three to four times the sales as its total valuation.

When the Virani family at the helm decided to restrict the stake sale to 15-20 per cent, food & beverages giant PepsiCo India had backed out from discussions.

Another major, Agrotech, has met the Balaji management and conducted a due-diligence but have decided the company is 'too regional', with operations restricted to a few states.

According to media reports, private equity entities Actis Capital and Capital International have also engaged in discussion to buy the stake.

Advisory firm E&Y has been mandated to find buyers. Keyur Virani, director, Balaji Wafers, was not available for comments. A mail sent to Kellogg's remained unanswered till the time of going to press.

The salty snacks market in India is dominated by PepsiCo (with Lays, Kurkure), ITC (Bingo), Haldiram's and Parle Products, with a number of regional brands.

The breakfast cereal market remains small, largely in the region of Rs 800-900 crore, led by cornflakes, which is a Rs 700-crore segment, dominated by Kellogg's, which has 60 per cent share.

Oats is a Rs 160-crore market, dominated by Quaker from PepsiCo. Marico recently stepped into oats and has built its Masala Oats franchise quite well. Its market share here is estimated at 14-15 per cent in oats.