By Aditya Kalra

NEW DELHI, March 4 (Reuters) - Private equity investor

Blackstone has pulled out of the race to pick up a minority

stake in the snacks business of India's Haldiram's over

valuation concerns, two sources with direct knowledge of the

matter said on Tuesday.

Rival bidder Temasek remains in the race to acquire a

minority stake in the business, said a third source with direct

knowledge of discussions.

Blackstone had spent seven months on the deal, but there is

"no turning back" now from a decision to end talks, one of the

first people said.

Haldiram's, which also has restaurant operations, is

estimated by Euromonitor International to hold a near 13% share

of India's $6.2 billion savoury snacks market, and its snacks

business has proved a tempting asset for many foreign investors.

But valuation has been a sticking point in the deal talks

between Haldiram's and Blackstone, which was initially keen on a

majority stake but later agreed to go for a smaller share,

Reuters reported in November.

While Blackstone wanted around a 15% stake at a valuation of

roughly $8 billion and to work with management in the future,

Haldiram's was only keen to get them onboard as a financial

investor and at a higher valuation of $10 billion, said the

first source.

Haldiram's CEO Krishan Kumar Chutani declined to comment.

Blackstone did not immediately respond to Reuters' request for

comment, and Temasek declined to comment.

There was also a disconnect over a potential IPO timeline.

While Blackstone wanted Haldiram's to consider an IPO within

three years of investment, the Indian company was pushing for

five years.

Haldiram's started in 1937 with a tiny shop in the city of

Bikaner in the western desert state of Rajasthan.

One of Haldiram's most popular snacks is "bhujia", a crispy

fried Indian snack made with flour, herbs and spices and sold

for as little as 10 rupees (12 U.S. cents) in mom-and-pop

stores.

(Additional reporting by Aditi Shah and Dhwani Pandya; Editing

by Jan Harvey)