Ruchi Soya To Raise Rs 4,300 Crore Via FPO To Prepay Debt

The Patanjali Group-owned Ruchi Soya Industries Ltd. is looking to raise Rs 4,300 crore via fresh equity to prepay debt.

Its follow-on public offer comprises issuing 6.6 crore shares at Rs 615-650 apiece. That values the maker of edible oil at Rs 23,130 crore, a discount to the current market capitalisation because of the low public float. The Ruchi Soya FPO opens on March 24 and closes March 28.

The company expects nearly 80% of the debt to be repaid through the proceeds, Sanjeev Asthana, chief executive officer at Ruchi Soya, told BloombergQuint. Interest savings will flow through to the profits, he said.

In 2020-21, the company paid Rs 370 crore in interest and Rs 181 crore in the first half of FY22.

Patanjali owns 98.9% of Ruchi Soya. Following the FPO, the public float will rise to 19.18%. The company, required to reach 10% public float within 18 months of acquiring the edible oil maker through bankruptcy proceedings in December 2019, was penalised by the stock exchange for missing the deadline. It is now required to meet 25% public float by December-end, when it completes three years of the acquisition.

"We will soon announce the details of how we will achieve the minimum public shareholding after the FPO," Baba Ramdev, non-executive director of Ruchi Soya, told BloombergQuint on the sidelines of a press conference on Monday. However, he did not confirm whether Patanjali will dilute its shareholding to achieve the 25% float.

Ruchi Soya entered the food and nutraceutical segment through acquisition of assets from its parent Patanjali last year. The segment, which is yet to acquire sizeable scale, will see further product additions. "We have in-principle agreed to transfer the food and nutraceutical segment to Ruchi Soya," said Ramdev.

Ruchi Soya will focus on four areas—edible oil, foods segment, nutraceutical segment and dependence on domestic palm oil production through palm plantations set up across the country, he said.

According to Ramdev, over some years, the edible oil segment—which contributes 85% of the revenue—will come down to 20-30%, and food and nutraceutical will emerge as large revenue earners for Ruchi Soya.

The company is also looking to improve its Ebitda margin to double digits as food and nutraceuticals will improve revenue, said Asthana.

Ruchi Soya had an Ebitda margin of 6.2% for the year-ended March 2021, and 6.25% for the first half ended September.

The company will also look at crafting a dividend policy in the next financial year. "Currently, since 98.8% is held by the parent, we haven't considered this policy," said Asthana.

The policies will be formulated once the FPO is complete, and "will be in line with best practices", said Ramdev.