Ruchi Soya FPO opens Thursday: Everything you need to know

Ruchi Soya is into fast-moving consumer goods (FMCG) and fast-moving health goods (FMHG). It 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. Ruchi Soya owns brands such as Mahakosh, Sunrich, Ruchi Gold and Nutrela. In 2019, Patanjali Group had acquired the stock exchange-listed company through an insolvency process for Rs 4,350 crore.

Ruchi Soya Industries came out with its FPO to meet market regulator Sebi’s norm of minimum public shareholding of 25 per cent in a listed entity. Last year in August, it had received the go-ahead from Sebi to launch the FPO. The draft red herring prospectus (DRHP) for the same was filed in June last year.

According to 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.

Patanjali, which presently owns 98.9 per cent of the company, at the upper end will dilute around 19 per cent and 18 per cent at the lower end of the price band. The remaining 6-7 per cent, to meet the mandatory 25 per cent public float, will be diluted before the Sebi deadline of December 2022, the company said.

The company plans to utilise the net proceeds for repayment and/or prepayment of borrowings, funding incremental working capital requirements and general corporate purposes, according to the information provided in the red herring prospectus (RHP).

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 per cent for the retail investors and the remaining 15 per cent is for non-institutional bidders.

Investors who wish to subscribe to Ruchi Soya FPO can bid in a lot of 21 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 13,650 to get a single lot of Ruchi Soya Industries. The shares will be listed on both BSE as well as the National Stock Exchange (NSE).

The applicants also must note that the cut-off time for UPI mandate confirmation is Tuesday, March 29, 2022, upto 12:00 pm. If they fail to do so then their application may not be considered.

SBI Capital Markets, Axis Capital and ICICI Securities are the book running lead managers to the offer while Link Intime India is the registrar of the issue.

Before heading into the FPO, the anchor portion will open on Wednesday, March 23, 2022.

Speaking on the edible oil sector, Ravi Singh, vice president and head of research at Share India Securities said that the indefinite war between Ukraine and Russia has triggered a fear of hike in edible oil prices as well as a shortage in supply, although for a short-term.

Commenting on the upcoming FPO, he said that though the financials of Ruchi Soya are a bit weak and the growth earnings are not stable, given the company’s strong base and background and the requirement of its products, investors may subscribe to this FPO.

Santosh Meena, head of research at Swastika Investmart said, “The post-issue market capitalization will be Rs 22,494 – 23,530 crore with an equity dilution of 18.25-19.11 per cent. It has a strong backup from the Patanjali Group and we are seeing a turnaround in the company where it managed to turn profitable. It has a strong product portfolio and is one of the largest fully integrated edible oil refining companies in India.”

He further noted that, “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.”

The share allotment with the designated stock exchange will take place on Thursday, March 31, 2022, and the shares commence trading on Wednesday, April 6, 2022, according to the timeline given in the RHP.