Patanjali-backed Ruchi Soya Industries’ FPO (follow-on public offering) has opened on Thursday, 24 March 2022 for subscription to raise Rs 4,300 crore and will close on 28 March 2022. The company fixed a price band at Rs 615 to Rs 650 per share for its follow-on public offer. T The FPO consists of fresh issuance of equity shares for an amount aggregating to Rs 4,300 crore.

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Ruchi Soya) IPO Details:

Issue OpensThursday, 24th March, 2022
Issue ClosesMonday, 28th March, 2022
Face ValueFurther Public Offering of Equity Shares aggregating upto ₹ 4,300 Cr
Issue Size (₹ Cr)₹ 4,300 Cr
FV₹ 2/- Per Share
Bid Lot21 shares
Price Band₹ 615 – 650
QIB50% of the offer 
NIB15% of the offer ( ~ ₹ 645 Cr)
Retail35% of offer ( ~ 23,150 K Shares, ₹ 1,505 Cr)
Appl. for 1x Retail~ 11.02 Lacs

Ruchi Soya FPO Review: in video presentation form

Anchor Book :

  • Ruchi Soya Industries Limited garnered Rs1,290 crore from anchor investors ahead of its further public offering (FPO)
  • Societe Generale, BNP Paribas, The Sultanate of Oman – Ministry of Defence Pension Fund, Yas Takaful PJSC, MK Cohesion, UPS Group and Alchemy are among the foreign investors in the anchor book
  • Domestic investors include ASK Investments, Volrado Ventures, Kotak Mutual Fund, SBI Pension Fund, UTI Mutual Fund, Aditya Birla Sun Life Mutual Fund, Quant Mutual Fund, Winro Commercial, HDFC Life Insurance, SBI Life Insurance, Authum Investments etc.
  • 21.1% of the anchor book was allocated to 24 mutual fund schemes.

About Ruchi Soya

  • Ruchi Soya Industries Limited (“Ruchi Soya”) was incorporated in1986.
  • Company was acquired by its current promoters after completion of the Corporate Insolvency Resolution Process
  • Ruchi soya has presence in Indian edible oil sector and one of the largest fully integrated edible oil refining companies in India.
  • Manufacturers  soya foods under their brand ‘Nutrela’
  • Company has launched a range of premium edible oils and blended edible oils and ‘Nutrela High Protein Chakki Atta’ and ‘Nutrela Honey’ last year and adding other products from Patanjali’s Food portfolio.
  • Owns 23 manufacturing units (17 operational) with  a strong network distribution of 97 sale depots, 4763 distributors, and 458 K retail outlets. Ruchi Soya is the largest player in terms of allocated zones, to undertake palm plantation, by the Govt. Helps in backward integration of sourcing palm oil

Ruchi Soya : Diversified Product Portfolio

Ruchi Soya FPO: Financials

Particulars / (₹ In Cr)H1FY22FY21FY20FY19
Revenue from Operations11,261.1916,318.6313,117.7912,729.23
Revenue Growth (%)24.40%3.05%
EBITDA706.541,018.37458.47221.96
EBITDA (%)6.25%6.22%3.48%1.73%
Net Profit337.81680.777,714.6134.13
Equity Share Capital59.1559.1559.1565.29
NAV(₹ ) as stated148.82137.35383.15-13,847.47
Post IPO Equity72.39
FV2
IPO Price650
EPS ( FY21)18.81
PE( FY21)34.56
PE (TTM)26.55
Market Cap in Rs. Cr23527
Market Cap / Sales1.44

Salient Points

  • Ruchi Soya CMP is Inflated Price due to low float.
  • from present 98.9%, promoter holding to come down to 80.8%.
  • Company has to ensure 25% dilution by Dec 2022.
  • Debt will come down 80% after FPO
  • Like Adani Wilmar, Company’s revenue significantly depends on the sale of edible oil products.
  • In FY2021 and 6m ended sept 2021, its revenue from sale of edible oil products contributed 84.51% and 81.42%, of total revenues from operations, respectively.
  • Company currently has 18 nutraceutical products, in its product basket, in sports, medical and general nutrition.
  • Market leader in branded soya chunks with a market share of 40%

Cons

  • Company’s revenue significantly depends on the sale of edible oil products, and any decline in that sale could materially impact financial performance.
  • A spike in edible oil prices is likely in the near-term as the Russia-Ukraine war has hit shipments of sunflower oil. Ukraine and Russia together account for 90% of India’s sunflower oil imports.
  • Company depends almost entirely on third party suppliers for raw materials.
  • Has high exposure to foreign currency risks.
  • Volatility in raw material prices
  • Increasing competition

Ruchi Soya) FPO: Assessment

  • Entirely a fresh issue
  • Credit rating A- ( Adani Wilmar A+)
  • Net Debt of Rs 800 cr (Adani Wilmar A Debt Free)
  • Company’s foray into other FMCG and FMHG products, ilike oleochemicals, biscuits, rusks, wheat flour, honey and nutraceuticals is positive.
  • Company is leveraging its brand “Neutrela” with a range of premium products like “Neutrela High Protein Chakki Aata” and “Neutrela Honey”.
  • Ruchi Soya with backing of Patanjali group has demonstrated effective strategy to procure the key raw materials and has a track record of managing volatility in the commodity prices and foreign exchange markets.
  • Post its takeover by the Patanjali Group, there has been a sharp upswing in its operations and company has generated a profit of Rs 680.77 crore in FY2021 compared to loss of Rs 5573.2 Crore in FY2018.
  • Strong parentage.
  • Patanjali moving Food products to its portfolio
  • Enjoys a strong brand recall
  • Wide distribution network.
  • Products are consumed by masses.
  • Towards a diversified FMCG & FMHG (Fast Moving Health Goods) focused company,
  • Should help Ruchi Soya increase revenue & profitability in coming years.
  • Due to huge dilution on account of fresh issues, EPS may not see sharp increase.
  • On Post FPO equity, TTM P/E works out to 26.6x.
  • Looks reasonable when compared with peers Adani Wilmar (TTM PE -57x) and others.

Ruchi Soya FPO: Apply or Not

  • Risk  :  Moderate / Low
  • Expected Reward   : Moderate to Low Profit . Some chances of low loss   (depends on markets at that moment)
  • Listing Gains  :  Quite possible but not sure. Even AWL listed at par
  • Hold for Medium/ Long Term:  Looks OK to me.
  • Subscription  :  Expected to be avg. due to Size & market downturn.   Retail 2-3.5 x
  • I am likely to apply in this IPO.  Quantum of application ( if opting for HNI) to be decided late on Day 3 based on demand for IPO.
  • Above are my views only. Please do your own diligence.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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