What Ruchi Soya Brings To Baba Ramdev’s Patanjali

The Yoga guru Baba Ramdev-backed company will pay Rs 4,325 crore to the lenders after Adani Wilmar Ltd., the maker of Fortune cooking oil, withdrew from the resolution process citing deterioration of Ruchi Soya’s assets due to “significant delays”.

The Funding Plan

Patanjali has created a special purpose vehicle that will receive a Rs 800-crore loan from the State Bank of India, Bank of Baroda and Union Bank of India, said a person aware of the transaction on the condition of anonymity as details are not public. The remaining amount will be financed as working capital debt, he said.

The unit, backed by Patanjali’s corporate guarantees, will be merged with Ruchi Soya, he said. Patanjali will also infuse Rs 235 crore into the packaged foods maker, giving it a shareholding of 95 percent, the person said, adding that existing investors of Ruchi Soya will own 5 percent.

Patanjali’s acquisition comes at a time when its revenue is expected to fall for the second straight year, according to the March 30 report of Brickworks Ratings.

The maker of Dant Kanti toothpaste and Kesh Kanti shampoo reported revenue of Rs 4,701 crore (provisional) for the nine months ended December 2018 and a profit of Rs 557 crore before interest, insurance cost, depreciation and taxes, according to a CARE Ratings report. The company’s turnover had declined about 10 percent year-on-year to Rs 8,136 crore in FY18, while profit fell by nearly three-quarters to Rs 343 crore.

What Patanjali Gets

Ruchi Soya reported a turnover of Rs 12,029 crore in 2017-18. The person quoted earlier said it’s expected to remain at the same level in FY19.

In the nine months ended December, the soya chunks maker’s total income remained nearly flat at Rs 9,652.39 crore. It, however, reported a profit of Rs 40.66 crore compared with a loss in the year-ago period.

Ruchi Soya’s Portfolio

Patanjali would take two-and-a-half years to reach the scale that Ruchi Soya has in the edible-oil market, Sameer Kalra, founder of Target Investing, told BloombergQuint, justifying the acquisition. “Ruchi Soya does not have any issues with the operations of its business and its edible oils are one of the fastest moving in the market, which is what Patanjali will now gain access to.”

Edible oils for the retail market contribute about 25 percent of Ruchi Soya’s revenue and 35 percent comes from soya chunks, Kalra said.

After the takeover, Patanjali will get nearly 70 percent of its revenue from soybean-based products. It will own Ruchi Soya’s oilseed processing facilities and popular brands like Nutrela, Ruchi Gold, Ruchi Star.

Patanjali also has the option to sell the Rs 1,000-crore palm plantation that the company has in southern India, said the person quoted earlier.

Reverse Merger

The acquisition allows Patanjali Ayurved to merge with Ruchi Soya, a listed company, the person said. Baba Ramdev had in December talked about a possible listing of the Patanjali Group. But it’s not clear if Patanjali will keep Ruchi Soya public or take it private.

SK Tijarawala, a spokesman for Patanjali, declined to comment on BloombergQuint’s queries.