Patanjali Share Price down 5% as OFS floor price set at 19% discount

Patanjali Foods, previously known as Ruchi Soya Industries, hit 5% lower circuit on July 13 after the company launched an offer for sale (OFS), at a floor price of ₹1,000 per share, representing a 19% discount compared to the previous day's closing price of ₹1,228.05.

The purpose of the sale is to meet the Securities and Exchange Board of India's (SEBI) requirement of having at least 25% of the company's shares owned by the public.

During the two-day OFS, Patanjali Ayurved, the parent company of Patanjali Foods, plans to sell 2.53 crore shares. The sale was initially open to non-retail investors on July 13, with retail investors being able to participate from July 14 onwards.

The floor price of ₹1,000 per share guarantees Patanjali Ayurved a minimum of ₹2,530 crore in proceeds from the share sale. Additionally, if the option is exercised, an additional 72.39 lakh shares, representing 2% of the total stake, may also be sold.

The offering is expected to generate approximately ₹3,258 crore for Patanjali Ayurved, helping the company meet the minimum public shareholding requirement of 25%. As of June 2023, the Promoter and Promoter Group have an 80.8% ownership stake in Patanjali Foods, while Patanjali Ayurved possesses a 39.37% stake in the company.

Patanjali Foods, previously known as Ruchi Soya Industries, underwent insolvency proceedings initiated by the National Company Law Tribunal in December 2017. However, in July 2019, Patanjali Ayurved's recovery plan for Ruchi Soya was approved, resulting in the company's public shareholding being reduced to 1.10% after implementing the resolution plan.

In a recent earnings call, Patanjali Foods highlighted its leading position in the oil business with well-known brands like Ruchi Gold, Mahakosh, and Sunrich. The company's focus is on expanding this segment and improving profitability, aligning with the Atmanirbhar Bharat campaign of the National Mission on Edible Oil Oil Palm.

Additionally, Patanjali Foods aims to grow its food business by leveraging its strong brand recognition to capture a larger market share. The food segment is expected to offer higher profits compared to the oil segment.

Overall, Patanjali Foods aims to increase its public ownership through the share sale, meeting regulatory requirements while further expanding its presence in the oil and food sectors.