Companies run by god-men need regulation too

That the yoga teacher and entrepreneur "Baba" Ramdev has the highest of ambitions was evident from the "India ka growth icon" banner behind him at Tuesday's press conference to announce Patanjali Ayurved's 2015-16 financial results. There were no regulatory requirements for a public disclosure of the results, as Patanjali is an unlisted entity, but it is a reflection of Mr Ramdev's confidence in the success of his business empire that he chose to do so anyway. His confidence certainly wasn't misplaced: From Rs 446 crore in 2011-12, Patanjali's revenue jumped to Rs 2,006 crore in 2014-15, and around Rs 5,000 crore for the year ended March, 2016. Mr Ramdev announced that Patanjali will cross Rs 10,000 crore by March 2017. That's scorching growth by any standards and gives the established multinational giants in the fast-moving consumer goods space a real run for their money. Indeed, if Patanjali achieves its revenue target for 2016-17, it will be ahead of Nestle, Colgate-Palmolive and Procter & Gamble. Brokerage IIFL Capital has estimated that Patanjali's sales would increase to Rs 20,000 crore by 2019-20. Mr Ramdev has, in fact, made defeating multinational corporations a central part of his corporate communication. And in true corporate style, the Hardwar-headquartered behemoth has roped in two top advertising agencies to step up its growth.

If ayurveda got a booster shot when Patanjali burst into the FMCG market, "Sri Sri" Ravi Shankar's Art of Living has also been quick to merge business with spirituality. Earlier this month, newspapers had full-page advertisements for Ojasvita, a malt drink from Sri Sri Ayurveda, prompting analysts to start talking of that company as the new disruptor in the FMCG market. To close the gap with Patanjali's distribution, Sri Sri plans to more than quadruple its offline stores - called the Divine stores - from 600 now to 2,500 by 2017.

But questions will now begin to be asked about how well businesses like Mr Ramdev's or Mr Shankar's conform to the overall regulatory framework. There are still many grey areas. As argued in this newspaper earlier this month, most of these businesses run by spiritual gurus have crowd-sourced their funds from followers even though the law on "collective investment schemes" (defined as any collection of funds to the extent of Rs 100 crore) would deter crowd-funding for a business idea that openly says it is a business seeking money. That's the reason perhaps why Mr Ramdev has been silent on his profit figures, stressing revenue growth instead.

Then there is the issue of related-party transactions. A majority of Art of Living's FMCG products are made by the Sumeru group of companies which is run by Mr Shankar's close relatives, including his nephew. Sumeru's software company is responsible for Art of Living's digital presence, its realty company is involved in Art of Living's construction projects, and so on. The law is tough on related-party transactions and imposes tough compliance conditions. There are also many open questions about whether current food and drug regulations can deal with consumer products from companies like Patanjali. The spiritual gurus running these businesses would do well to note that the aura of spiritualism might not shield them from the regulatory structure for too long.