Ruchi Soya slumps after announcing FPO at deep discount. All you need to know

Edible oil maker Ruchi Soya Industries Ltd, which was once burdened with a massive debt pile leading to its sale to a consumer goods company backed by yoga guru Baba Ramdev, is floating a public offering this week.

The Rs 4,300-crore follow-on public offering (FPO) will help the company pare its debt. In the process, it will also allow its promoters to collectively trim their holding to meet regulatory requirements.

In December 2017, Ruchi Soya was referred to the National Company Law Tribunal following petitions from creditors Standard Chartered Bank and DBS Bank. Under the insolvency resolution process, Patanjali Ayurved Ltd pipped Adani Wilmar with an offer of Rs 4,350 crore in August 2018 after a long-drawn battle with the Gautam Adani-led group.

Here are all the details regarding the offer:

What is the offer all about?

Ruchi Soya will issue fresh shares worth Rs 4,300 crore. The company had proposed a public offering in June 2021. It received regulatory approval in August 2021.

What will the company do with the proceeds?

The company will use Rs 2,663.825 crore towards repayment or advance payment of its borrowings.

It will use Rs 593.424 crore towards working capital requirements and spend an undisclosed amount for general corporate purposes.

What is the offer price and when can one bid?

The company has priced the FPO at Rs 615-650 apiece, which is 30-35% discount to the market price last Thursday.

The offer opens on March 24 and closes March 28. Investors can bid a minimum of 21 shares and in its multiples thereafter. New shares will be allotted on April 4 and would be available for trading on April 6.

How has the stock market reacted?

Shares of Ruchi Soya fell as much as 17% at open on Monday before recovering a little. The shares were trading about 10% down at Rs 903 apiece in late afternoon.

How will the offer impact its ownership?

Patanjali Ayurved and other entities comprising the promoter group currently own about 98.9% stake in the company after acquiring the firm a little under two years ago.

At the upper end of the price band, the company will issue about 66 million new shares to the public. After the offer, promoter and promoter group holding will reduce to 79-80%.

As per the Securities and Exchange Board of India (SEBI) rules, the company has time till May 2023 to bring down promoters’ stake to 75%.

Who are the merchant bankers?

SBI Capital Markets, Axis Capital, and ICICI Securities are merchant bankers managing the IPO.