Yoga guru and businessman Baba Ramdev-helmed Patanjali Ayurved has signed an agreement to sell its food retail business to Ruchi Soya Industries, a firm it acquired through an insolvency process, for Rs 690 crore.
The deal – comprising 21 major products such as ghee, honey, spices, juices and atta – is to accelerate Ruchi Soya’s transition into a “leading” fast most consumer goods (FMCG) company. Following the deal, which is on a slump sale basis, the company will be named as Patanjali Foods, Ruchi Soya said in a regulatory update.
The deal also includes acquisition of Patanjali Ayurved’s manufacturing units in Haridwar, Uttrakhand, and Newasa unit in Maharashtra, transfer of employees, distribution network and customers among others. The company’s board has approved this business transfer agreement, effective May 9, 2022, it said.
The proposed acquisition falls under a related-party transaction.
With the acquisition of Patanjali Ayurved’s food business portfolio, Ruchi’s food portfolio is expected to contribute to about 18% of total revenue in FY2023, compared with 6% revenue in FY2022. This will have a positive impact on the margin profile and will re-position Ruchi from largely commodity-oriented company to leading Food company of India, it added.
The Patanjali Group had acquired Ruchi Soya, following the completion of a Corporate Insolvency Resolution Plan on December 18, 2019. This came after two foreign lenders – Standard Chartered Bank and DBS Bank – filed insolvency suits against Ruchi Soya Industries before the National Company Law Tribunal (NCLT) in 2017.
Patanjali Ayurved transferring its food retail business to Ruchi Soya Industries is also part of its strategy to focus on non-food, traditional medicine and wellness business, it added.
In April, Ruchi Soya said it would evaluate the “most efficient” mode to merge Patanjali Ayurved’s food portfolio with itself and had also decided to change the name of the company to Patanjali Foods.
Earlier in March, Ruchi Soya had raised Rs 4,300 crore through a follow-on offer as it intended to become a debt-free company. The FPO, which had closed on March 28, was also to meet the minimum public shareholding norm of 25% as required for a listed entity. Prior to the FPO, Patanjali Group held about 98.9% stake in Ruchi Soya, while the remaining was held by public shareholders.
Patanjali Ayurved, which aims to become India’s largest food and FMCG company in the next five years, had transferred its biscuits business to Ruchi Soya for Rs 60 crore. The combined annual turnover of Patanjali Ayurved group and its subsidiary Ruchi Soya is about Rs 35,000 crore.
At present, Hindustan Unilever Ltd is the country’s largest FMCG player.
Following the announcement, shares in Ruchi Soya ended up 9.59% at Rs 1,186.85 on the BSE, which closed down 0.20% on Wednesday.