image credit: Dalal Street Investment Journal
The Patanjali Ayurved owned Ruchi Soya Industries Ltd. plans to issue fresh shares worth Rs 4,000 crore in the open market using a follow-on public offer(FPO). Patanjali owns a 98.9 per cent stake in the company and wants to reduce its holding to ensure compliance with the norms of the Securities and Exchange Board of India(SEBI). It also aims to generate fresh capital which would be used to cut debt and fund the company’s expansion.
Patanjali Ayurved, founded by yoga guru Baba Ramdev, had acquired Ruchi Soya in 2019 through an Insolvency and Bankruptcy Code(IBC) process for an amount of Rs 4,350 crore. The process resulted in Patanjali owning a 98.9 per cent stake in the company leaving little in the hands of public investors. Ruchi Soya is expected to issue fresh shares worth Rs 3,000-4000 crore. According to one source, the company is being advised by Axis Capital, ICICI Securities and SBI Capital for the sale.
According to a second source, the company prefers an FPI which gives it more freedom to set the price. This is not the case in selling to institutional investors through a QIP where the pricing has to be decided using a rigid formula set by SEBI. An FPI also improves the chances of getting a better price in the secondary market as it is open to a larger number of investors.