Baba Ramdev’s Patanjali-controlled Ruchi Soya gets nod for Rs 4,300-crore FPO

Ruchi Soya Industries Ltd, the publicly listed edible oil company now controlled by fast-moving consumer goods and wellness products firm Patanjali Ayurveda, has received regulatory approval for a follow-on public offering (FPO).
The proposed FPO, worth Rs 4,300 crore, received the capital markets regulator Securities and Exchange Board of India’s green signal on August 13, a note from SEBI shows.The share sale will help the company move forward on meeting the minimum public listing norms.

Currently, yoga guru Baba Ramdev-led Patanjali and associated firms own a 98.9% stake in Ruchi Soya. Patanjali had acquired a majority stake in the maker of soya food brand Nutrelafor Rs 4,350 crore through an insolvency process in December 2019.The acquisition also brought edible oil labels Mahakosh and Ruchi Gold under Patanjali’s fold.

Patanjali has three years to bring down its holding to 75% or lower, as per regulatory norms. It is likely to first reduce its stake to around 90% in the FPO and will have to dilute or divest a stake in coming years to meet the listing norms.

Since the acquisition Patanjali has been slowly bringing parts of its own business under the listed company besides opening its doors to a multi-brand strategy for the same product offerings. 

For instance, during the February-July period last year, it added honey and wheat flour product under the Nutrela brand. In May this year Ruchi Soya acquired the biscuits, rusks and cookies business from Patanjali.In June,

Patanjali transferred its noodles and breakfast cereals business to Ruchi Roya and launched a nutraceuticals unit. 

In effect, instead of going for a straight merger to bring all the businesses under the listed arm, Patanjali is selectively moving assets under Ruchi Soya and playing a multi-brand strategy for categories in which it already has a presence.
The stock market had already seen a similar move coming in, leading to a sharp run-up in the price of Ruchi Soya. The company’s shares, which were trading under Rs 4 each before Patanjali’s takeover,are currently hovering around nearly Rs 1,120 each. Ruchi Soya has a market capitalisation of Rs 33,000 crore.

Ruchi Soya intends to use the proceeds from the FPO to repay loans and meet its working capital requirements and other general corporate purposes.
SBI Capital, Axis Capital and ICICI Securities are managers to the issue.
Ruchi Soya’s revenue rose 73% to Rs 5,266 crore for the quarter ended June 30 over the year-ago period, buoyed by higher prices of edible oil. Net profit more than tripled to Rs 181 crore from Rs 49.28 crore a year earlier.