Patanjali to be 'non-profit' firm, aims to beat HUL next year in sales

Yoga guru Baba Ramdev told Mint newspaper that he intends to  turn Patanjali Ayurved Ltd into a 'non-profitable' firm to enable reinvestment of the firm's profit back to the society.  On Tuesday, the Haridwar-based company also announced its foray into e-commerce for its FMCG items, partnering major players in the space, including Amazon and Flipkart, and targeting over Rs 10 billion (Rs 1,000 crore) this year itself.

Addressing a press conference, Ramdev said: "We believe our partnerships with e-commerce players will help take Patanjali products to more consumers in urban and rural regions in a convenient and efficient manner. We are targeting revenues of Rs 10 billion annually through online sales."

Patanjali also wants to overtake the country's biggest consumer goods company Hindustan Unilever in sales. The company reported FY17 sales of Rs 10,561 crore, a third that of the listed HUL, which reported sales of Rs 34,487 crore. Ramdev said Patanjali crossed Rs 10 crore in online sales in December and is targeting more than Rs 1,000 crore this year itself from e-commerce.

Patanjali's charity through educational institutes

In an interview to a Hindi news channel, Ramdev pointed out that Patanjali has spent over Rs 100 billion by now in charity.

Patanjali has set before it a target of doing charity of Rs 1 trillion. As a first step, Ramdev has set up a charitable organization, Patanjali Seva Trust.

Outlining the organization's various ambitious projects he added that in next 10 to 15 years, Patanjali will turn into "a centre of education bigger than Nalanda and Takshashila, the two famous ancient Indian universities." Besides, by the middle of 2018, an education hub of about 10,000 students will be set up, he said.

According to Patanjali sources, a university and an acharyakulam are coming up in the vicinity of Patanjali Yogapeeth-Phase1 (near Roorkee on Delhi-Haridwar highway).

"By popularizing Yoga and Ayurveda, the expenditure on healthcare can be cut and Rs 100 lakh crore( Rs 1 trillion)  that is spent on healthcare will be saved," Ramdev told TOI.

The yoga guru, stating Patanjal's various achievements, said "As a result of ceaseless and sincere hard work by millions of devoted followers, workers and employees, our campaign to restore to our ancient knowledge of Yoga and Ayurveda their past glory and put them on the world map has been successful. We have developed people's faith in these and linked our culture to science."

Why Patanjali plans to turn into a non-profit firm?

Radhika Jain, partner, Grant Thornton India Llp told Mint, "In the structure where a Trust is the holding entity, the tax liabilities go to the holding entity. And, if the Trust’s motto is to use all income for charity, it gets huge tax advantage....A trust as a holding entity ensures the succession of the company’s assets, wealth preservation in perpetuity."

According to India’s Income Tax Act, Charitable Trusts and Section 8 companies, including non-government entities, can claim tax exemption under Sections 11, 12, 12A, 12AA and 13 of the Income Tax Act.

The Income Tax Act does not prohibit a charitable trust from carrying on business and income generated from businesses undertaken by a charitable trust shall also qualify for tax exemption provided certain conditions are fulfilled.

Patanjali expansion

Patanjali products are available across 10-15 lakh kirana stores. The company is also in the process of recruiting about 20,000 people to strengthen it sales and marketing team.

Meanwhile, it has been entering new categories. It recently launched packaged bottled water under the Divya Jal brand and is set to enter the apparel and footwear segments. “By Diwali this year or by January next year, we will be launching the apparel and accessories range with 3,000 products which will include shoes , kidswear, sportswear, yoga wear among others under the brand Patanjali Paridhan,” Ramdev said.

Patanjali Ayurved is a privately held company that is 98.6% owned by Ramdev’s close aide Acharya Balkrishna, who was ranked the 19th richest Indian by Forbes in 2017 with an estimated net worth of $7.3 billion. Ramdev does not directly own shares in the company.