What do we know about the FPO of Ruchi Soya as of date?

For now, the dates for the FPO hav been announced and we know that the size of the issue would be around Rs.4,300 crore. However, the price for the FPO is yet to be decided. The Rs.4,300 crore FPO of Ruchi Soya opens on 24th March and closes for subscription on 28th March. The price will be announced to the FPO opening date. This will enable the company to get the funds in the current financial year itself.

It may be recollected that Baba Ramdev’s Patanjali Ayurveda had purchased Ruchi Soya from NCLT as part of the bankruptcy resolution process. This was necessitated after Ruchi Soya reached the point of default with too much debt. Ruchi Soya fit into the larger FMCG plans of Patanjali Ayurveda because Ruchi Soya is already a key player in India in the food products business with a slew of marquee brands already available in its product portfolio.

While we come to the fund application later, let us first look at the statutory requirement for Patanjali to reduce their stake and enhance public shareholding. For any listed company, SEBI stipulates at least 25% public holding. Currently, Patanjali holds 98.9% in Ruchi Soya and post FPO it will fall from 98.9% to 81% while 19% will be held by public. Reducing the holding of Patanjali to 75% will require another 2 years, but the owners are on track.

Now for the application of this fund infusion of Rs.4,300 crore? The largest share will be used to repay borrowings of the company, either in part or in full. FMCG is a working capital intensive business, so Ruchi Soya will also partially bankroll its working capital needs. In case there is any surplus after that, it will be used for general corporate purposes. There is no major capital expenditure (capex) planned by Ruchi Soya for the time being.

Just to give a background, Ruchi Soya was incorporated in 1986 and is a top FMCG brand in the edible oils sector in India. It leads in soya foods and caters to retail and institutional clients. Key products of Ruchi Soya include edible oil, oleochemicals, textured soya proteins (TSP), noodles and breakfast cereals. Ruchi Soya has 22 refining facilities, 11,000 TPD of refining capacity, 100 sales depots, 4,763 distributors and 457,788 retail outlets in all.