Patanjali Foods Eyes 20-25% Growth In Foods Portfolio In FY23

Ruchi Soya Industries Ltd. will acquire the food business of its promoter Patanjali Ayurved Ltd. and change its name, a transition that brings an end to the 36-year-old brand.

India's largest edible oil maker will buy Patanjali's food unit for Rs 690 crore along with manufacturing plants on a slump-sale basis, Ruchi Soya said in an exchange filing. "This strategic initiative for acquisition of food business shall strengthen the food product portfolio with an array of brands and contribute to the growth in terms of revenue and Ebitda.”

Ruchi Soya's management also decided to rename the company to Patanjali Foods Ltd. post the acquisition, the filing said.

The acquisition is aimed at improving operational efficiencies and eliminating competition among various businesses of the group.

Patanjali's food business comprises 21 major products, including ghee, honey, spices, juices and wheat flour. It would also include the production facilities located at Padartha, Haridwar, and Newasa, Maharashtra.

The acquisition, according to the company, will happen at a fair market value (net), based on all the fixed assets of the food division as well as the respective current assets. It intends to pay 15% of the amount in the first tranche, 42.5% each in the second and third tranches, respectively.

The transaction, which awaits shareholders' nod and regulatory approvals, is likely to be completed by July 15.

The Haridwar-based Patanjali Group had acquired Ruchi Soya, which was under insolvency, in late 2019.

In FY21, Patanjali Group managed to cross the Rs 30,000-crore revenue mark for the first time, with Ruchi Soya contributing Rs 16,318 crore or 54% towards the total revenue. The maker of Dant Kanti toothpaste not only turned Ruchi Soya profitable but also helped it shed over Rs 9,300 crore of debt. Ruchi Soya is now a debt-free company.

Last year, Patanjali had transferred its biscuits, breakfast cereals and noodles businesses to Ruchi Soya for about Rs 65 crore.

"Along with Patanjali's food business, Ruchi's food portfolio is expected to contribute 18% towards total revenue in FY23 compared to 6% in FY22," Ruchi Soya Chief Executive Officer Sanjeev Asthana told BQ Prime over the phone.

In FY22, the food business of Patanjali rose 28% year-on-year at Rs 4,174 crore. It is also growing 2-2.5 times of industry growth of 11%, Asthana said. "The idea is to re-position Ruchi from largely commodity-oriented company to a pure-play FMCG business within four-five years, and we expect the combined food business to grow 20-25% in FY23 with revenue touching Rs 6,800-7000 crore."

The five-year goal, he said, is to cross Rs 22,000 crore in revenue (excluding oil) at constant price. Going ahead, 20% of the company's revenue will come from its old commodity business (edible oil) and 80% will be from food and FMCG, said Asthana.

The company is expecting about Rs 2,500 crore of Ebitda on an annualised basis with the transfer of food business, according to Asthana. As on March 31, Patanjali's food business comprises 536 stock-keeping units across eight product categories with Ebitda of Rs 650 crore and high margin of 15-20%.

Patanjali Ayurved's turnover stood at Rs 10,605 crore as on March 31.

Eye On Exports

Ruchi Soya has also mapped out aggressive plans in terms of exports to unlock its next phase of growth. According to Asthana, the company is in the process of hiring business heads, functional heads to ramp up exports.

"We see an export revenue of Rs 2,000 crore achievable in three years," said Asthana. "The company is already exporting to over 36 countries and generating revenue worth Rs 400-500 crore.”