Patanjali Ayurved Ltd, which owns 98.9% of Ruchi Soya Industries Ltd, is planning the upcoming follow-on public offering (FPO) of the edible oil maker in such a way that the pricing of the shares is well-balanced from the perspective of both existing and incoming shareholders, founder Baba Ramdev said.
Ramdev also hinted at a possible public offering of Patanjali Ayurved, but said the transformation of Ruchi Soya is his priority.
Ruchi Soya has filed a draft prospectus with the Securities and Exchange Board of India (Sebi) for a ₹4,300 crore FPO to raise fresh money. While Ruchi Soya is a listed company with a discovered price in the market, an FPO allows a company to price its shares freely and thus, it may be priced at a sharp difference from the market price.
Patanjali had acquired the erstwhile bankrupt firm known for the Nutrela brand of products in 2019 for around ₹4,350 crore through an insolvency and bankruptcy code (IBC) process.
Ruchi Soya’s shares relisted on 27 January 2020 at ₹16.10 and soared to a one-year high of ₹1,535 on 29 June, largely on account of its extremely small public float. On Friday, its shares closed at ₹1,125, up 1.25%, on BSE.
“We will ensure that the price is well-balanced from the perspectives of both our existing shareholders and the new investors that will be coming into the FPO. We have done all the preparations, we have submitted to Sebi all the materials they have asked for, and we are hoping for the approval to come soon," Ramdev said in an interview. “We already have a lot of interest from investors," he added.
The FPO will help the firm increase the public float, taking a step forward to meeting Sebi’s minimum public shareholding (MPS) norm of 25%.
Currently, the company needs to increase public shareholding by only 9% to meet the MPS requirement and the remaining 15% is required to be completed by December 2022. However, after utilizing the 20% uptick in offer size as permissible under regulations, the FPO is expected to ensure compliance of 15-20% public shareholding requirement, the company said.
Proceeds from the FPO will be used mainly to reduce Ruchi Soya’s debt, with around 60% of the capital planned to be used for that purpose, with another 20% earmarked for working capital use and the rest 20% for other general corporate use.
“We want to make the company debt-free. The target is to become debt-free in the next two to three years," he said.
“While we have already turned around the company and it is now profitable, the bigger thing is that we have transformed the company from a commodity-focused company to an FMCG, health, and food company. We have brought in governance, professional management, transparency and accountability," said Ramdev.
“Going ahead, only 20% of the company’s revenues will come from the commodity business, which is its old edible oil business and 80% will be from food, FMCG and wellness." Ramdev added that nutraceuticals will be the next big focus area for Ruchi Soya.
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