Ruchi Soya FPO: Edible oil major Ruchi Soya Industries has priced its Rs 4,300 crore follow-on public offering (FPO) which will run from March 24 to 28 at Rs 615-650 a share. “The FPO comprises equity shares of face value of Rs 2 each aggregating to Rs 4,300 crore. The issue also includes a reservation of up to 10,000 equity shares for subscription by eligible employees. If such placement is completed, the follow-on size will be reduced,” Ruchi Soya said in a statement. Ruchi Soya primarily operates in the business of processing oilseeds, refining crude edible oil for use as cooking oil, manufacturing soya products, and value-added products. The company has an integrated value chain in palm and soya segments having a farm to fork business model. It has brands such as Mahakosh, Sunrich, Ruchi Gold and Nutrela.
Ruchi Soya FPO: Price Band
The higher end of the price band – Rs 650 a share – represents a 35 per cent discount from Thursday’s closing price. The firm said the minimum bid will be for 21 shares and in its multiples thereafter. The red herring prospectus says shares will be credited on April 5 and their trading will start a day after. Refunds will initiate on April 4.
Ruchi Soya, which got approval for the FPO in August 2021, was acquired by Patanjali for its Nutrela brand of products in 2019 for Rs 4,350 crore through the insolvency process.
Ruchi Soya FPO: What is the Rationale?
The proceeds from the FPO will be used for repaying certain outstanding loans, meeting incremental working capital requirements, and other general corporate purposes.
The dilution through the FPO would help Baba Ramdev-led Patanjali Ayurveda, which owns Ruchi Soya, to adhere to the minimum shareholding norms. In August 2021, the firm 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 promoters currently have a nearly 99 per cent stake in the edible oil major. The company needs to dilute a minimum 9 per cent stake in this round of the FPO.
As per the Securities and Exchange Board of India (SEBI) rules, the company needs to bring down promoters’ stake to achieve the minimum public shareholding of 25 per cent. It has around 3 years to pare promoters’ stake to 75 per cent.
Ruchi Soya Stocks Tank 17%
Ruchi Soya stock opened 17.27 per cent lower at Rs 831 against the previous close of Rs 1004.45 on BSE. At 9:41 am, the stock was down 11.53 per cent to Rs 888.60 on BSE. However, the stock has gained 4.13 per cent since the beginning of this year and risen 33.59 per cent in a month.
Ruchi Soya pioneered soya foods in India under the Nutrela brand in the 1980s. Patanjali group’s acquisition enables Ruchi Soya to benefit from the ayurveda firm’s pan-India distribution network, know-how in FMCG and group synergies.
Ruchi Soya shares relisted on 27 January 2020 at Rs 16.10 apiece and soared around 52 week high of Rs 1,378 on 9 June 2021. The stock is now trading at Rs 1,004.35 on the BSE, down 6.22 percent from its previous close.
Should You Invest?
Unlike an IPO, where the share price is based on the company’s performance, the share price for an FPO is market-dependent as the share is already trading on the market.
Aayush Agrawal, senior research analyst – Merchant Banking, Swastika Investmart Ltd., said: “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.”
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