Edible oil maker Ruchi Soya, owned by billionaire Acharya Balkrishna’s consumer goods giant Patanjali Ayurved, finally received approval from India’s stock market regulator recently to launch a $585 million follow-on public offer (FPO) of its shares. Listed Ruchi Soya is 99% owned by privately held Patanjali and the FPO for close to 10% of its shares is the first step in fulfilling the regulatory requirement of having a minimum 25% public float. The company has until December 2022 to meet that target.
Patanjali had acquired Ruchi Soya for $620 million, through a bankruptcy court order, in December 2019 after billionaire Gautam Adani withdrew from the bidding process. The latter’s Adani Wilmar, a joint venture with the Kuok clan’s Wilmar International, had been the only other serious contender for Ruchi Soya.
Patanjali’s cofounder Baba Ramdev (who has a board seat but owns no shares in the company), is a politically well-connected yoga guru. Ramdev and Balkrishna, who are close friends, founded Patanjali in 2006 as a maker of a range of herbal, ayurveda products. Patanjali sells everything from herbal toothpastes and cosmetics to noodles and jams. Balkrishna, who prefers to wear a traditional white dhoti, has often said that his wealth will be used to serve others.
The $1.3 billion (revenue) Patanjali had infused $160 million as equity into Ruchi Soya, borrowing the balance $465 million from a consortium of banks led by the government-owned State Bank of India.
Headquartered in Indore, Madhya Pradesh, the 35-year-old Ruchi Soya is an integrated player in the edible oils business with a presence across the value chain and with secured access to palm oil plantations. It owns 22 manufacturing units with a refining capacity of 11,000 tons per day, seed crushing capacity of 11,000 tons a day and packaging capacity of 10,000 tons a day. It slipped into insolvency after spiraling costs led to debt piling up.
The company’s shares that were trading at about 19 rupees when it went into bankruptcy in December 2017, have been on a roller-coaster since Patanjali acquired it. Trading was stopped in November 2019, and resumed in January 2020 after which the stock went on an upward trajectory touching a high of 1,519 rupees on June 26. They are now trading at around 1,055 rupees.
Ruchi Soya will use nearly 60%, or about $365 million, of the FPO proceeds to repay and prepay part of its debt and $80 million as working capital, according to the offer document.