Edible oil firm Ruchi Soya, which is owned by Baba Ramdev-led Patanjali Ayurved, will hit the capital market with its follow-on public offer (FPO) this week on Thursday, March 24, 2022 to raise up to ₹4,300 crore, and conclude on March 28. Shares of Ruchi Soya fell in Monday's session after the company fixed the floor price of FPO at discount from Thursday's closing price.
The FPO committee of Ruchi Soya decided on a floor price of Rs615 to Rs650 per equity share on the issue. The minimum bid lot shall be 21 and in multiples of 21 Equity Shares thereafter.
“If we look at the valuations then the stock is trading with a PE of around 32 which is lower than the industry average. Patanjali group wants to make this FPO successful so that they can come out with more FPOs successfully whereas they are also likely to come out with IPOs of their other segments. We have a neutral rating for this FPO however aggressive investors can apply for the long term,” said Aayush Agrawal, Research Analyst - Merchant Banking, Swastika Investmart.
In August last year, the company had received capital markets regulator Sebi's go-ahead to launch the FPO. It had filed the draft red herring prospectus (DRHP) in June 2021. The company is coming out with the public issue to meet Sebi's norm of minimum public shareholding of 25% in a listed entity. In 2019, Patanjali acquired Ruchi Soya, which is listed on the stock exchanges, through an insolvency process for ₹4,350 crore.
“Due to indefinite war between Ukraine and Russia, hike in edible oil prices as well as shortage in supply seems round the corner, at least for the short-term. India's 90% sunflower oil requirement is catered by Ukraine and Russia and Sunflower oil comprises 15% of most edible oil brands. Although the financials of Ruchi Soya are a bit weak, given the company’s strong base & background and the requirement of its products, Investors may subscribe to this FPO,” said Ravi Singh, VP and Head of Research at Share India Securities.
Ruchi Soya had said it will utilise the entire issue proceeds for furthering the company's business by repayment of certain outstanding loans, meeting its incremental working capital requirements and other general corporate purposes.
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