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Baba Ramdev's Patanjali Ayurved takes a key initiative to strengthen its position in the FMCG sector, by selling food retail business to its listed subsidiary Ruchi Soya aggregating ₹690 crore. The transaction is expected to complete by July 15, 2022.
Haridwar, conglomerate Patanjali acquired Ruchi Soya in 2019. Ruchi Soya is the largest edible oil marker in the country.
Ruchi Soya on Wednesday signed a business transfer agreement with the parent, Patanjali to acquire the latter's food retail business that consists of manufacturing, packaging, labeling, and retail trading of certain food products along with manufacturing plants located at Padartha, Haridwar, and Newasa, Maharashtra.
Following the development, investors cheered by tapping Ruchi Soya shares on stock exchanges. The company's shares settled at ₹1186.85 apiece higher by ₹103.85 or 9.59% on BSE. The shares had touched an intraday high of ₹1191.30 apiece earlier in the trading hours before correcting, however, stayed on a bullish tone the entire day.
Here are 10 key highlights of the agreement as per the regulatory filing:
1. As mentioned in its prospectus for FPO, Ruchi Soya announced the acquisition of the entire food business of Patanjali Ayurved to accelerate its transition to a leading FMCG company.
2. The strategic initiative of acquiring Patanjali's food business is seen to strengthen Ruchi Soya's food product portfolio with an array of brands and also contribute to the growth in terms of revenue and EBIDTA.
3. Patanjali's food business comprises 21 major products namely Ghee, Honey, Spices, Juices & Atta, etc. Also, the transaction will consist of the transfer of employees, assets (excluding Patanjali’s brand, trademarks, designs, and copyrights), current assets (excluding debtors, vehicles, cash, and bank balance) contracts, licenses and permits, distribution network, customers related to the Food Retail Business Undertaking of PAL.
4. The acquisition is valued at a Fair Market value (Net) of ₹690 crore based on all the fixed assets of the Food division and respective current assets on a slump sale basis.
5. Among the total transaction value of ₹690 crore - 15% of the consideration ( ₹103.50 crore) will be paid by Ruchi Soya within 3 days from the execution of the business transfer agreement; meanwhile, 42.5% of the consideration ( ₹293.25 crore) will be paid on the closing date of the transaction; and finally the remaining 42.5% of the consideration ( ₹293.25 crore) will be paid within 90 days from the closing date.
6. The proposed acquisition falls under the related party transaction. Patanjali is one of the promoters of the Company. Furthermore, Ram Bharat, Managing Director and one of the promoters of the Company, is also a Director of PAL. Acharya Balkrishna, one of the promoters and Chairman of the Company also holds 98.5 % of the paid-up equity share capital of PAL. The transaction is being undertaken on fair value.
7. With this acquisition, Ruchi Soya also informed that it has reaffirmed its position to be a strong FMCG company in its journey towards becoming a major player in the FMCG space as committed to its shareholders at the time of its maiden FPO.
8. The Patanjali Group, one of India’s leading FMCG Group’s with a focus on health and wellness acquired Ruchi Soya according to completion of CIRP and implementation of the Patanjali Resolution Plan on December 18, 2019. Since then, the company has been showing sustained & robust financial performance in terms of revenue, EBIDTA, and net profits on a sequential basis.
9. Ruchi Soya reported revenues of ₹16,382.97 crore in FY 2020-21 as against ₹13,175.36 crore in the previous year with EBIDTA margin at 3.48% in FY 2020 and 6.22% in 2020-21. PAT stood at ₹680.77 crore by end of FY21.
10. As of March 2022, Patanjali Ayurved has a turnover of approximately ₹10,605 crore.