Among a long list of companies that have filed for their IPO approvals from the Securities and Exchange Board of India (SEBI), here’s a company that is coming up with its follow-on public offering. It is Ruchi Soya Industries Limited. So let us dive deep into the company’s business model and fundamentals.
About Ruchi Soya Industries Limited
Ruchi Soya Industries Limited is a diversified FMCG company with strategically located manufacturing facilities and well recognized brands having pan India presence. The company is one of the largest in the FMCG Companies in the Indian edible oil sector and is one of the largest fully integrated edible oil refining companies in India.
The company is a pioneer in soya chunks which are associated with nutrition and good health. The company further expanded its packaged food portfolio by acquiring the ‘Pantanjali’ product portfolio of biscuits, cookies, rusks, noodles, and breakfast cereals.
The company is also involved in to the wind power generation business, where the renewable power generated is used for sale and for captive use. The company also leverages Pantanjali’s expertise and technical know-how in nutraceuticals and benefit from the synergy in the research and development and the pan India distribution network. The company offers a diverse range of products from the likes of edible oils, oleo chemicals, honey and atta, oil palm plantation, biscuits, cookies, and rusks to noodles and breakfast cereals.
Details about the FPO
Following are the details of the company’s FPO:
- The company is not yet out with its FPO subscription dates.
- The company is not yet out with its FPO issue price, through which valuations can be assessed.
- The company’s shares will list on the NSE and the BSE.
Objectives of the FPO
Following are the objectives of the company’s FPO:
- The company will receive gross proceeds from the issue amounting to ₹4, 30,000 lakhs.
- Out of this, the company will use a part of the net proceeds towards repayment/prepayment of certain borrowings availed by the company.
- The company will also use a part of the proceeds to fund the working capital requirements of the company.
- A part of the proceeds will also be used towards general corporate purposes.
- Further, the company wants to enhance its credibility and corporate image by listing its shares on the stock exchanges.
Following are the key strengths in the company’s business:
- The company has a strong promoter pedigree of the Swami Ramdev led Patanjali group, a leading FMCG and wellness-oriented brand.
- The company has an experienced leadership and management team.
- The company is upstream and downstream integrated and is one of the key players in Oil Palm Plantation.
- The company has a good track record of managing volatility in commodity prices and foreign exchange markets.
- The company’s products enjoy strong brand recognition in the Indian market.
- The company benefits from a strong, established and extensive distribution network.
- The company has also forayed into health and wellness space with the launch of Nutraceuticals.
Following are the key risks in the company’s business:
- The company’s revenues significantly depend on the sale of edible oil products. For FY20, edible oil sales contributed 81% to the company’s total revenues, thus posing a concentration risk.
- The company is required to comply with the minimum public shareholding norms and any further share sales in this regards could significantly affect the share price.
- Unfavorable local and global weather patterns may have an adverse effect on the company’s business and its financial condition.
- The company is involved in certain legal proceedings. Any adverse effect on this front could impact the company’s business.
- The company’s cashflow from operations were negative for FY20.
- The company’s promoters have pledged their shares.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations increased from ₹1202928 lakhs in FY18 to ₹1317536.56 lakhs in FY20.
- The company incurred a loss of ₹557327 lakhs in FY18, which turned into a profit of ₹771461 lakhs in FY20.
- The company’s earnings per share stood at ₹12.39 as of December 2020.
- The company’s net asset value stood at ₹126.8 per equity share as of December 2020.
- The company’s total borrowings stood at ₹399496 lakhs as of December 2020.
- The company’s equity share capital stood at ₹5915 lakhs as of December 2020.
Although there are no exact listed peers of Ruchi Soya Industries Limited owing to a wide range of products, the company counts Dabur Limited, Britannia Industries Limited, Nestle India Limited, Agro Tech Foods Limited, Zydus Wellness Limited, Godrej Agrovet Limited, Marico Limited, and ITC Limited among its peer group.
Following were the details regarding the company’s FPO. The company is not yet out with the FPO subscription dates and the FPO price. Investors should do their due diligence about the company’s business and valuations and then take a decision to invest in the company’s FPO or not.