Ruchi Soya

By Geetanjali Kedia

about 3 years ago

Further Public Offer (FPO) Size: Rs. 4,300 cr

Entirely fresh issue to repay Rs. 2,663 cr debt and Rs. 593 cr working capital
In turn, Promoter Patanjali Group’s stake will drop from 98.9% to 80.8% post FPO.

Price band: Rs. 615-650 per share

M cap: Rs. 19,224 cr at upper price band, implying 18.3% dilution

Issue Dates: Thu 24^th Mar to Mon 28^th Mar 2022, Listing 6^th April 2022

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

21x Increase in Free-Float

Share price surged 40% from Rs.800 to Rs.1,140 in just 1 week before announcement of FPO on 11th Mar 2022, on extremely thin volumes. Post FPO, free-float (non-promoter holding) will increase 21x from 33 lakh shares to 7 crore, shrinking promoter holding to 80.8%, from present 98.9%. On an increased float, valuations will compress, purely due to demand-supply factors.

CMP is an ‘Artificial’ Price

Current market price (CMP) has been ruling high or won’t be incorrect to say that, artificially kept high to make the FPO a success, as it gives an appearance of FPO being priced at a ‘substantial’ 28% discount to the CMP. With barely 1.1% public float, shares are extremely concentrated and hence can be ‘easily controlled’. Infact, CMP of Rs.888 may immediately fall after close of FPO i.e. from 29^th March itself, and may reach closer to FPO price by 6^th April, when new shares get listed and come for selling in the secondary market.

Comparison with Adani Wilmar

Both Ruchi Soya and Adani Wilmar are expected to close FY22 with PAT of about Rs. 800 cr, but for FY23E, Adani’s PAT is likely to be Rs. 1,100 cr over Rs. 1,000 cr for Ruchi Soya. M cap of Adani Wilmar is Rs. 53,000 cr and Ruchi Soya’s present m cap is at Rs. 26,250 cr. Even if Rs. 4,300 cr is added, m cap comes to Rs. 30,500 cr. But Adani’s fundamentals are stronger given its size (revenue 2x of Ruchi), debt free status, higher credit rating (A+ vs A- for Ruchi Soya) and growth prospects. Adani is expanding capacity, with potential to double revenue in next 4 years, whereas FPO may not materially boost Ruchi Soya’s topline and only debt will lower, yet it will have debt of Rs 800 cr (net). Infact, lower interest expense will increase PAT but EPS may not jump materially, due to huge dilution.