Rs 4,300 crore! Baba Ramdev's Ruchi Soya gets go ahead from Sebi to float FPO - Know reason behind Patanjali's decision

In a major development, edible oil firm Ruchi Soya, which is owned by Baba Ramdev-led Patanjali Ayurveda, has received capital markets regulator Sebi's go-ahead to raise Rs 4,300 crore through a follow-on public offer (FPO).

Why this FPO?

The FPO is being launched to meet the Sebi norm of minimum public shareholding of 25 per cent in a listed entity.

The company, which filed the draft papers with Sebi in June, obtained its observations on August 14, an update with the regulator showed on Tuesday, as per a report by news agency PTI.

Going by the draft papers, the entire issue proceeds will be used for furthering the company's business by repayment of certain outstanding loans and meeting its incremental working capital requirements and other general corporate purposes.

SBI Capital Markets Ltd, Axis Capital Ltd, and ICICI Securities Ltd are the lead managers to the issue.

Ruchi Soya's acquisition by Patanjali

In 2019, Patanjali acquired Ruchi Soya, which is listed on stock exchanges, through an insolvency process for Rs 4,350 crore.

SEBI rules

The promoters currently have nearly 99 per cent stake and according to sources they have to dilute a minimum 9 per cent stake in this round of the FPO.

As per the Sebi rules, the company needs to bring down promoters' stakes to achieve the minimum public shareholding of 25 per cent. Ruchi Soya has three years to pare promoters' stake to 75 per cent.

Ruchi Soya primarily operates in the business of processing oilseeds, refining crude edible oil for use as cooking oil, manufacturing soya products, and value-added products.

The company has an integrated value chain in palm and soya segments having a farm to fork business model. It has brands such as Mahakosh, Sunrich, Ruchi Gold and Nutrela.

In May, Ruchi Soya had announced the acquisition of biscuits business from Patanjali Natural Biscuits Pvt Ltd (PNBPL) in a slump sale at Rs 60.02 crore. The objective of the acquisition was to expand the product portfolio of the existing business of the company, it had said.