Ruchi Soya stock slumps after FPO. Here’s all you need to know

If Baba Ramdev’s Patanjali Ayurveda-promoted edible oils major Ruchi Soya was hoping that its Rs 4,300 crore follow-on public offering (FPO) would help perk up its stock price, the company was clearly in for a rude shock. 

On Wednesday, the day the newly allotted shares began trading, the script lost as much as 19% in early trade. Although it did rebound, it was still down by more than 9% around noon.

How many shares has Ruchi Soya allotted and at what price?

The company board has approved the allotment of around 6.62 crore equity shares with a face value of Rs 2 each, aggregating to Rs 4,300 crore, it said in a regulatory filing. The allotment price has been fixed at Rs 650 apiece, the company said earlier. Following the allotment of shares, the paid-up equity share capital of Ruchi Soya stands increased from Rs 59.17 crore to Rs 72.4 crore, the company said. 

How many times was the FPO subscribed?

It was subscribed 3.6 times. The FPO got bids for 17.60 crore equity hares against the size of 4.89 crore shares on the final day of bidding, March 28. The retail quota, which was 35% of the issue, saw a 90% subscription.

Ruchi Soya had reserved half of the offer for qualified institutional buyers and 15% for non-institutional investors. Their portions were subscribed 2.2 times and 11.75 times, respectively. Employees put in bids for 77,616 shares against the 10,000 shares reserved for them. The company mopped up Rs 1,290 crore through the anchor book. 

So, why has the stock fallen so sharply following the FPO?

While the reasons are not entirely clear, it could have something to do with a controversy the company had landed in. The Securities and Exchange Board of India (SEBI) had taken cognizance of the circulation of unsolicited text messages advertising the issue. The messages, which were allegedly sent to Patanjali Ayurved users, recommended them to invest in the offer.

“Great news for all beloved members of Patanjali parivar. A good investment opportunity in Patanjali Group. Patanjali Group company—Ruchi Soya Industries Ltd has opened the Follow-On Public offer (FPO) for retail investors. The issue closes on 28 March 2022. This is available in the price band—Rs 615-650 rupees per share, i.e discount of about 30% to market price,” the unsolicited message read.

Following this, SEBI had given investors the option of withdrawing from the FPO. The withdrawal window was open till March 30. 

The regulator, citing the circulation of the above message, asked Ruchi Soya to issue an advertisement in newspapers cautioning the investors about the circulation of such unsolicited SMS. The advertisement was to be issued on March 29 and 30, the market regulator had said in its order.

How many applications were withdrawn?

As many as 14,583 applications were withdrawn. These amounted to 9.74 million shares. Institutional bidders withdrew 7.86 million bids, while high net-worth investors recalled 1.31 million. Retail investors withdraw 5.70 lakh shares. With this withdrawal, the overall subscription fell to 3.39 times from 3.6 times on March 28.

On March 29, Ruchi Soya did issue a notice saying they have lodged a first information report to find out the origin and the culprits of unsolicited text messages.

Could there be any other reason for the fall?

Ruchi Soya’s share price had been artificially high, considering the fact that the public float was just over 1%, affording little liquidity. Now that a fifth of the shares are available in the open market, some of the investors who had entered the stock at rock bottom prices, could be cashing out, although there is no indication of this yet.