Is Patanjali's Rs 20,000 crore revenue target realistic? Experts weigh in

With revenue of Rs 10,561 cr in FY17; doubling purely on FMCG in a year will be stiff, analysts say

With a reported turnover of Rs 10,561 crore in financial year 2017 (FY17), Baba Ramdev and Acharya Balkrisha - led Patanjali Ayurved Limited (PAL) expects its revenue to hit Rs 20,000 crore mark in financial year 2017-18 (FY18).

Analysts, however, are sceptical and are of the view that Patanjali may not be able to achieve this steep revenue target in FY18 purely on the basis of growth in the FMCG segment given the current industry growth rates and that the revival in rural demand is still some time away.

"One must be mindful that this Rs 20,000 crore will also include commodity related products such as rice, wheat, edible oil, milk etc. Growth rates for pure FMCG products are likely to slow down. Patajnali is now quite big in products like honey, toothpaste, shampoos and hair oil. So from the base these pure FMCG products has created, doubling of revenue looks very difficult. The category growth rates will be around 13% at best. Though penetration into newer markets will help, doubling still seems a farfetched idea as of now," says Abneesh Roy, an analyst tracking the sector with Edelweiss Securities.

For the rural demand to kick in, analysts say the monsoon season this year will also be a crucial. That apart, companies are now in the process of catching up with Patanjali in terms of ayurvedic products. In this backdrop, Patanjali will find it difficult to double this huge revenue base it has already created.

"I have doubts whether Patanjali can achieve the Rs 20,000 crore revenue target it has set for itself. Volume-wise, the FMCG industry is growing in single digits (between 4% - 6%) for most players. For FMCG players, we need a good monsoon to act as a catalyst to trigger a demand revival. Even one good monsoon (last year) was not enough to revive the rural demand," explains G Chokkalingam, founder and managing director of Equinomics Research & Advisory.

Experts also suggest that Patanjali, to a large extent, has already penetrated the target group for its products, i.e. people have already shifted from the products of multinational companies (MNCs) and other domestic players to Patanjali. As a result, increasing the consumer base and revenue by 100% in FY18 will be a stiff challenge.

"I think the Rs 20,000 crore revenue figure for FY18 is too steep for Patanjali to achieve. There are alternate products now available in the ayurvedic segment from other players as well, such as Hindustan Unilever (HUL), Dabur, Colgate-Palmolive (India), Emami etc. That apart, the pricing advantage for Patanjali over other players has also reduced, with the FMCG companies resorting to aggressive pricing for their ayurveda products. I believe 20% - 25% revenue growth for Patanjali in FY18 is a more realistic and an achievable target," believes A K Prabhakar, head of research at IDBI Capital.

Earlier in August 2016, Patanjali Ayurved had caught the attention of foreign research and brokerage house, CLSA, which wished that the company got listed at the bourses.