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MUMBAI : Baba Ramdev’s Ruchi Soya Industries Ltd, which planned to launch a follow-on public offering (FPO) in October to increase the stock’s public float, faces further delays because of low demand for its shares, two people with knowledge of the matter said.

The company must raise its public shareholding from the present 1.1% to over 10% to meet Securities and Exchange Board of India (Sebi) norms. The company’s promoters were planning to use the proceeds of the FPO to repay lenders.

“There is not enough demand for the issue. In case the issue fails to sail through, the company may withdraw the papers filed with Sebi," one of the people cited above said, requesting anonymity. Ruchi Soya was supposed to modify the terms and conditions of the share sale documents by the end of January but has not done so, this person added.

Queries to a spokesperson for Ruchi Soya and subsequent reminders were not answered.

The company filed draft papers with Sebi in June and later received approval from the regulator to proceed with the public offering. According to Sebi rules, Ruchi Soya needs to increase its public shareholding to 10% within 18 months of relisting. The 18-month window ended in July last year.

Patanjali acquired Ruchi Soya for 4,350 crore through the bankruptcy process. Interestingly, the banks who lent to Patanjali for the acquisition were the lenders to bankrupt Ruchi Soya. Almost the entire 99% shareholding of the new promoters stands pledged to the banks.

Experts said that Ruchi Soya’s low public float contributed to its high valuation, making it difficult to find buyers for the share sale.

Ruchi Soya is currently valued at 24,114 crore, lower than the 33,255 crore market valuation when it first proposed the FPO.

“The delay is most probably connected to the market price of the shares. In this connection, it is worthwhile to refer to the reprimand given by Sebi to Baba Ramdev on his public statements promoting the FPO a few months back," said Srinivas Kotni, managing partner, LexPort, a law firm.

In September, Baba Ramdev was seen in a viral video exhorting his followers to invest in shares of Ruchi Soya during a yoga session, landing him in regulatory soup.

In the video, Ramdev said that anyone who invested in Ruchi Soya shares would become a crorepati, a violation of regulatory norms. Subsequently, the market regulator warned the company and sought explanations.

Ruchi Soya’s breaching of the regulatory requirement of increasing public shareholding may draw punitive action from Sebi.

“It is mandatory to comply with the statutory timelines for offloading shares to the public. If the delay can be connected to any fraudulent or unfair trade practices, under Section 15HA of Sebi Act, 1992, a maximum penalty of 25 crore can be imposed after due adjudication. Otherwise, after due process, Sebi can penalize the company under Section 15HB for up to 1 crore," Kotni said.

Moin Ladha, a partner at law firm Khaitan and Co., said Sebi would consider the justification for the delay in such cases. “While there are timelines prescribed for compliance with the minimum public shareholding, one needs to appreciate that market conditions impact such transactions. Therefore, before invoking provisions for non-compliance, Sebi would certainly consider justifications for the delay," Ladha said.

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