Wish you were listed, Patanjali Ayurved: CLSA

Based on FY15 revenue of over Rs 2,500 crore, CLSA says Patanjali Ayurved is bigger than listed players like Jyothy Labs and Emami

Baba Ramdev, a spiritual leader known for his yoga camps and ayurveda, has a new follower—foreign research and brokerage house CLSA.

A recent note titled ‘Indian Consumer: Taste of India’ by CLSA’s Vivek Maheshwari and Bhavesh Pravin Shah suggests  Patanjali Ayurved Limited (PAL), founded in 1997 as a small pharmacy, might be the most diversified consumer goods firm in India, bigger than Jyothi Labs and Emami.

“PAL perhaps lacks most ingredients for building a large-scale consumer goods business, be its negligible A&P (advertising and promotion) spends or distribution network. Yet, the brand power of a yoga guru has brought PAL into the top league with topline reportedly in excess of Jyothy Labs and Emami,” the report says.

Adding: “The plans are even more interesting as the company is now looking at ‘traditional’ ways to expand and targets to more than double the topline in coming years. While competition must be keeping its fingers crossed, all we can say is – ‘Wish you were listed’.”

The man behind the company’s meteoric rise is Ramdev, who left his home at the age of nine to study Sanskrit and yoga. He partnered with ‘Acharya’ Balkrishna in the 1990s to manufacture medicines. Ramdev took the responsibility of popularising yoga, while Balkrishna focused on the product-side.

“The game-changer was when the Aastha channel (spiritual TV) started featuring Ramdev’s yoga in the morning slot in 2003, which attracted huge following,” the report adds.

According to the report, 92 per cent stake in PAL is held by Balkrishna, while a  Scotland-based non-resident Indian couple, Sarwan and Sunita Podar, hold the remaining eight per cent. According to the report,  Ramdev has no stake in PAL.

Key numbers

CLSA says Patanjali Ayurved reportedly crossed Rs 2,000 crore in annual revenues in FY15, making it already bigger than Jyothy Labs and Emami. Gross revenues, which include that from other firms within the group such as pharmacy, are in excess of Rs 2,500 crore, it says.

In comparison, Jyoti Labs had consolidated revenue of Rs 1,515 crore, with a profit of Rs 121 crore in FY15, Emami reported a consolidated revenue of Rs 2,217 crore and net profit of Rs 485 crore.

While most consumer firms spend 10-15 per cent of revenues in A&P, PAL has done it without any meaningful A&P investments so far, CLSA notes. The company has a network of ‘dedicated’ franchise stores unlike peers and is present in about 200,000 outlets compared with two-seven million for peers.

Patanjali Ayurved’s products are typically at a 15-30 per cent discount to competing brands. According to the report, this has been possible through its strong sourcing back-end, The products are available on Amazon, too.

Notably, after the ban of Maggi by the Food Safety and Standards Authority of India, Ramdev announced Patanjali Ayurved's intent to foray into the instant noodle segment as well. Recently, the Defence Research and Development Organisation roped in Patanjali Ayurved to manufacture some herbal supplements and food products developed by it, and market in the country and abroad.