Ruchi Soya FPO

Ruchi Soya has got the SEBI approval for its Follow-on Public Offer (FPO) of Rs.4,300 crore and the FPO is likely to happen as early as next week.  It may be recollected that Patanjali Ayurved, owned by Baba Ramdev, had acquired Ruchi Soya from the National Company Law Tribunal (NCLT).

There are two main reasons for the FPO, as stated in the draft filed with SEBI by Ruchi Soya. Firstly, Patanjali Ayurved currently owns 98.9% in Ruchi Soya and it has to statutorily reduce the promoter stake to 75% by December 2022. This FPO would help Patanjali Ayurved to reduce its stake in Ruchi Soya and also increase free float.

The other reason is the reduction of debt in the books of Ruchi Soya. While Ruchi Soya does still have some bank debt, its predominant debt are the loans infused by Patanjali Ayurved. Nearly 60% of the FPO would go into repaying debts. It may be recollected that Patanjali had bought Ruchi Soya from NCLT for Rs.4,350 crore.

Ruchi Soya primarily operates in the business of processing oilseeds, refining crude edible oil into vegetable oil and the manufacture of soya and other value-added products. The company also follows a farm-to-fork business model with a backward integrated model that straddles the entire value chain.

Ruchi Soya has some marquee brands like Mahakosh, Sunrich, Ruchi Gold and Nutrela in its product portfolio. After the NCLT acquisition, Ruchi Soya listed at Rs.15 in Jan-20 and rallied to over Rs.1,500 before settling at the current level of Rs.1,100. The FPO is likely to be priced at a discount to the current market price.