Ruchi Soya - Patanjali Deal – Anything for minority shareholders?

What’s the deal?

Ruchi Soya is one of India’s largest manufacturers of edible oil and owns a large number of plants and top brands such as Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold. It owns about 24 plants that crush, mill, refine and package edible oils, making it one of the largest exporters of value added soy products.

Patanjali Ayurveda Limited is an Indian consumer goods company producing products in the categories of personal care and food. Baba Ramdev established the company in 2006 along with Acharya Balkrishna who is the CEO of company.

Company saw a decline of over 10 per cent in revenue at Rs 8,148 cr in FY18 as compared to FY17. Its profit saw over 50 per cent decline in FY18 at Rs 528.9 cr compared to the preceding year thereby putting a question on the revenue growth projections of the company.

What was the NCLT process?

In December 2017, the National Company Law Tribunal (NCLT) had referred Ruchi Soya for insolvency proceedings on the application of financial creditors Standard Chartered Bank and DBS Bank.

Adani Wilmar owner of Fortune brand submitted plan to acquire Ruchi Soya in August 2018. During the same time Patanjali moved NCLT against the decision to approve Rs 6000 cr takeover. By December 2018 Adani withdrew stating significant delays in resolution process.

Initially Patanjali offered Rs 4,160 cr along with Rs 1,700 cr working capital with a haircut of over 51 percent of the debt but after Adani Wilmar pulled out, Patanjali increased its bid value by around Rs 140 cr to Rs 4,350 cr. This offer excluded capital infusion of Rs 1,700 cr in the company.

Approved Deal Details

Committee of creditors (CoC) approved Patanjali Ayurved’s Rs 4,350 cr resolution plan for Ruchi Soya. Under this plan, lenders have agreed to a 52% haircut on the admitted claims.

The plan proposes Rs 115-cr infusion into Ruchi Soya. The resolution plan offers Rs 4,235 cr to stakeholders, of which Rs 4,053 cr will go to secured lenders, whose admitted claims are nearly Rs 8,377 cr. This means their recovery is about 48 percent. Unsecured financial creditors will get Rs 40 cr, against Rs 1,007 cr of admitted claims, implying a haircut of 96 percent.

Ruchi Soya owes around Rs. 9,345 cr. It owes SBI Rs. 1,822 cr through various instruments, including term loans and working capital loans; Central Bank of India Rs 816 cr; Punjab National Bank Rs 743 cr and Standard Chartered Bank India Rs 608 cr and many more banks. The CoC will present Patanjali's resolution plan to the National Company Law Tribunal (NCLT) on May 7.

What is in For the Baba?

This acquisition will help Patanjali to become largest player in soybean oil and will be able to beat India’s biggest vegetable oil company - Adani Wilmar which currently holds 19% of the packaged end of this market while Ruchi Soya has near about 14%.

Nothing for Minority Shareholders

If this deal get approved in NCLT first there will a cleanup of lenders. Total amount of Rs 4235 cr will be paid to secured and unsecured lenders. Banks have to take hit on their debt. For this they may give shares to banks. This will lead to dilution of existing equity shareholders.


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