Patanjali-backed Ruchi Soya Industries’ follow-on public offering (FPO) will open on Thursday, 24 March 2022 for subscription to raise Rs 4,300 crore and will close on 28 March 2022. Earlier this week, the company fixed a price band at Rs 615 to Rs 650 per share for its follow-on public offer. The FPO price is at a 29 per cent discount against the last close, from the upper price band. The FPO consists of fresh issuance of equity shares for an amount aggregating to Rs 4,300 crore.
Ruchi Soya issue also includes a reservation of up to 10,000 equity shares for subscription by eligible employees. Before heading into the FPO, the anchor portion opened on Wednesday, 23 March 2022. The FPO is primarily to bring down the promoter stake to 75% as per norms stated by the capital market regulator. Investors can make bids for Ruchi Soya FPO in a lot of 21 equity shares and multiples thereafter. At the upper price band, investors will require to shell out Rs 13,650 to get a single lot of Ruchi Soya Industries.
Should you subscribe?
Due to the indefinite war between Ukraine and Russia, hike in edible oil prices as well as shortage in supply seems round the corner, at least for the short-term. India’s 90% sunflower oil requirement is catered by Ukraine and Russia and Sunflower oil comprises 15% of most edible oil brands. Although the financials of Ruchi Soya are a bit weak, given the company’s strong base & background and the requirement of its products, investors may subscribe to this FPO.
It has a strong backup from the Patanjali group and we are seeing a turnaround in the company where it managed to turn profitable. It has a strong product portfolio and is one of the largest fully integrated edible oil refining companies in India. If we look at the valuations then the stock is trading with a PE of around 32 which is lower than the industry average. We have a neutral rating for this FPO however aggressive investors can apply for long term.
The company competes primarily in the Indian market, except in the case of exported soyabean meal where they compete with other international suppliers. They compete generally on the basis of product quality, customer service, price and consistency of supply and distribution capabilities with respect to their manufactured products.Even though Ruchi Soya has gone through a management change and financials also look good, our advice to investors would be to stay on the sidelines as these stocks have shown tremendous volatility in the past and better to allow the new management to settle & show consistent results in the coming year.
Sources: Financial Express
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