Avadh Snacks’ acquisition will help Prataap double revenue in 3 years: MD Amit Kumat
Over next three years, Prataap will invest around ₹150 crore to enhance capacity at its existing plants
New Delhi: Prataap Snacks Ltd, the Indore-based listed snack manufacturer that sells products under the Yellow Diamond brand, believes its recent acquisition of a majority stake in Gujarat-based Avadh Snacks Pvt. Ltd will help the company double its revenue within three years, its managing director and chief executive officer Amit Kumat said.
Prataap, which reported consolidated revenue at ₹1,038 crore for the year ended 31 March 2018, bought 80% stake in Avadh for ₹148 crore last month. The company may take over the remaining 20% equity in Avadh after four years.
“The acquisition gives us entry into Gujarat, which is the largest salty snacks market in India, where we had no presence so far. Product portfolio of Avadh is complementary to Prataap’s existing portfolio, and together we now have a good mix of regional and national flavours and variants. Not just Gujarat, this will also help us penetrate other markets in western India where we have limited presence,” Kumat added. However, the company will not launch any of Prataap products under Avadh’s brands or vice-versa.
Prataap, which has presence across northern and eastern parts of India, has very limited presence in western and southern India. “Prataap has almost no presence in three of the big states – Gujarat, Uttar Pradesh and Punjab, traditionally big markets for salty snacks. Avadh gives us instant entry into Gujarat, and we are working on developing our network in UP and Punjab,” Kumat said.
With a reach of 75,000 retail outlets in Gujarat, Avadh is the fourth largest player in the state. Prataap’s products reach 1.7 million outlets across the country. East is the largest market for Prataap with about 34% of revenue share, followed by west with 30%, north with 25% and south 11% of its annual revenue. According to Rajesh Savani, founder of Avadh Snacks, the company has made inroads into Gujarat and it can go deeper in its home market. However, Savani said, the promoters decided to sell the company as they could not take Avadh to the next level or make it a national player. “We do not have that financial strength or the capacity to take Avadh to the level where Prataap can take it,” added Savani.
Over next three years, said Kumat, Prataap will invest around ₹150 crore to enhance capacity at its existing plants, product innovation and marketing, while ₹25 crore will be pumped in to expand capacity at Avadh’s factory.
Interestingly, this is not the first acquisition by Prataap. In 2012, it acquired Prakash Snacks and then it acquired Yellow Diamond brand and the snacks business under it. “Prataap has, over the years, leveraged its understanding of target markets and consumer segments, product innovation capabilities, extensive distribution network, strategically located manufacturing facilities and focused its marketing and promotional activities to strengthen its brands and establish the Yellow Diamond brand across India,” Abneesh Roy, analyst with Edelweiss Securities said in a note on Prataap Snacks.