What are the key details of the Ruchi Soya FPO that is opening this week?
Answer
Answer
On Monday 21-March, the stock of Ruchi Soya closed nearly 10% lower. In fact, at one point in early trades, the stock was down almost 18% but recovered from lower levels. The reason was the deeply discounted pricing of the following on public offer of Ruchi Soya. The price band for the FPO has been set at Rs.615 to Rs.650. The upper end of the FPO price band reflects a 25-30% discount to the closing price. This largely makes the FPO attractive.
At the upper end of the price band at Rs.650 per share, the total FPO collections for Ruchi Soya would be to the tune of Rs.4,300 crore. It may be recollected that Ruchi Soya is owned by Baba Ramdev’s Patanjali Ayurveda group, bought from NCLT in 2019. This FPO will be in the form of fresh funds coming into Ruchi Soya and it plans to use these funds predominantly to prepay its debt and fund its short term working capital needs.
Let me now turn to the issue details. The follow on public offer (FPO) of Ruchi Soya will open on March 24th and close on March 28th, both days being inclusive. Investors can bid for a minimum lot of 21 shares. At the upper end of the price band of Rs.650, the minimum investment in the FPO would be Rs.13,650. The upper limit of Rs.2 lakhs for retail investors in the FPO would continue so it would be a maximum of 14 lots that retail can apply.
The principal purpose of the FPO is to reduce the promoter stake as per SEBI stipulation that public holding must be at least 75%. This FPO will reduce the stake of Patanjali Ayurveda from the current 98.9% to 81%. At the same time, the public holding will go up from 1.1% to 19%. However it would still take another couple of years before which Patanjali Ayurveda group can further reduce its stake in Ruchi Soya to the SEBI stipulated level of 75%.
Ruchi Soya is the largest player in branded palm oil with market share of 12% of branded palm oil in India. Close behind is Adani Wilmar with 11% market share. With the situation in Ukraine and Russia, there is likely to be a shift from sunflower oil to palm oil as Russia and Ukraine account for most of the sunflower seed production in the world. Ruchi Soya pioneered soya based foods in India via its Nutrela brand soya chunks.