Patanjali Ayurved to Divest 7% Stake in Patanjali Foods
Patanjali Foods filed a regulatory statement on Wednesday, setting the floor price for the upcoming offer at Rs 1,000 per equity share. The request will be open on July 13 and 14.
Baba Ramdev-led Patanjali Ayurved Ltd would sell up to 2.53 crore shares in its parent company Patanjali Foods Ltd, on stock markets to enhance public float and satisfy listing criteria. The Offer For Sale (OFS) method will be used to sell the shares of Patanjali Foods, which manufactures edible oils and other food goods. Patanjali Foods recently submitted a regulatory filing on Wednesday stating that their upcoming offer’s floor price is Rs 1,000 per equity share. This offer will be available on July 13 and 14.
Patanjali Ayurved, one of the most prominent players in the Indian FMCG sector, recently made a strategic move that could potentially have far-reaching implications. The company announced it would divest a 7% stake in its food processing arm, Patanjali Foods, which could reshape the business dynamics of the Indian food processing industry.
The move is part of the company’s broader strategy to streamline operations and maintain a robust financial position amidst a competitive market landscape.
The share sale will bring in at least Rs 2,530 crore for Patanjali Ayurved, a promoter of Patanjali Foods, at the floor price. On Wednesday, Patanjali Foods’ market capitalization was Rs 44,454.78 crore, and its shares finished slightly higher at Rs 1,228.05, a claim on the BSE. According to Patanjali Foods, the seller (Patanjali Ayurved) “proposes to sell up to 25,339,640 equity shares of the Company, each having a face value of Rs 2 (representing 7% of the Company’s total paid-up equity share capital)”.Currently, 19.18% of Patanjali Foods’ shares are owned by the public; however, to comply with Sebi regulations, this number must rise to at least 25%.
The company follows a low-cost model and primarily focuses on Ayurveda, yoga, and natural wellness, leveraging the founders’ credibility and nationwide network to drive growth. As a segment, Patanjali Foods is a significant part of Patanjali Ayurved, delivering various processed food items, including cereals, health drinks, spices, and juices.
Although Patanjali Ayurved has not officially disclosed the reasons for the stake sale, experts believe it could be part of the company’s strategy to raise capital and consolidate its position in the industry.
The stake sale might help Patanjali Ayurved to attract strategic investors who could bring operational expertise, augment the company’s distribution reach, or provide financial support for new projects. Further, the capital raised through the divestment could be used to reduce the company’s debt and reinvest in core business areas.
The stake sale in Patanjali Foods could have significant implications for Patanjali Ayurved and the broader Indian FMCG sector. To begin with, it has the potential to attract more international investment to the Indian food processing sector.
If a global FMCG player buys the stake, it could lead to an exchange of operational knowledge, best practices, and technology, potentially increasing the competitiveness of Patanjali Foods.
Secondly, the move could pave the way for further consolidation in the Indian food processing industry. If Patanjali Ayurved can successfully execute this divestment, other domestic FMCG players might follow suit, selling stakes in their businesses to raise capital, streamline operations, or forge strategic partnerships.
The market has reacted positively to the stake sale news, reflecting investors’ trust in Patanjali Ayurved’s strategic decisions. Analysts believe the sale could strengthen the company’s financial position, provide operational flexibility, and help it maintain its competitiveness in the ever-evolving FMCG sector.
As Patanjali Ayurved continues to carve its niche in the Indian FMCG market, the divestment from Patanjali Foods might represent a shift in the company’s business strategy.
The company’s ability to navigate this change and its robust portfolio and strong brand presence will play a pivotal role in determining its future success.
According to Patanjali Foods, Patanjali Ayurved can sell an additional 7,239,897 equity shares or 2% of the company’s total paid-up equity share capital. The overall stake dilution if the option is exercised will be close to 9%. According to the filing, “the offer is being undertaken by the seller, among other things, for achieving the minimum public shareholding of the company.”
The firm was eventually renamed Patanjali Foods after Patanjali Group purchased the insolvent Ruchi Soya Industries. Patanjali Foods had made a follow-on public offer (FPO) for Rs 4,300 crore to boost the public shareholding. Patanjali Foods’ overall revenue climbed from Rs 24,284.38 crore in 2021–2022 to Rs 31,821.45 crore in the most recent fiscal year. The edible oil segment’s revenue turnover increased from Rs 22,468.64 crore the year before to Rs 25,253.33 crore last fiscal. Revenue for the food and FMCG industry then quadrupled, from Rs 1,683.24 crore to Rs 6,218.08 crore in the fiscal 2022–23.
The Patanjali Foods stake sale is undoubtedly a move to watch closely. It’s not just about one company’s tactical decision but also an indicator of the changing dynamics of India’s FMCG sector, offering fascinating insights into business strategies, competition, and consolidation in one of the world’s most vibrant economies.
