Despite the blow suffered during its first attempt to acquire Ruchi Soya, Patanjali Ayurved is now showing signs of resilience.
Patanjali, which recently reiterated its intent to buy out the beleaguered edible oil player, has brought the Committee of Creditors (CoC) back to the drawing board.
However, Patanjali may have to tweak its offer in favour of the creditors to bag the deal, sources said.
Currently, the CoC is re-evaluating the Hardwar-based fast moving consumer goods player’s offer for acquiring Ruchi Soya. A top official from a bank that has lent to Ruchi Soya, said, “If we get a good deal, we will take Patanjali’s offer. Adani Wilmar is also willing to let Patanjali buy Ruchi Soya if the latter can match the offer. Prima facie, if the bid is lucrative for bankers, it shouldn’t be a problem.” Lenders met in Mumbai on Monday, after Patanjali approached them recently.
Earlier, Patanjali had lost the race to acquire Ruchi Soya to Adani Wilmar despite placing a higher bid. It made a comeback recently when Adani Wilmar bowed out from the process. Days ago, officials from Patanjali got in touch with the creditors and informed them about its willingness to acquire the oil company. They also said Patanjali is open to re-negotiation. Incidentally, Wilmar’s offer of Rs 43 billion in repayment to the creditors — higher than Patanjali’s Rs 41 billion – was a key factor that had encouraged the creditors to choose the edible oil major, sources said.
“We have expressed our intent to the creditors to acquire Ruchi Soya as we are still very much interested in the deal,” said SK Tijarawala, spokesperson for the Patanjali group. He also said that both parties are far from reaching a consensus and the matter is subject to approval of the National Company Law Tribunal. However, Patanjali is open to further negotiations.
According to sources, Patanjali is ready to increase the share of money to the creditors. “Patanjali may make a higher offer than Adani Wilmar’s Rs 43 billion to the creditors,” a person aware of the developments said.
Indore-headquartered Ruchi Soya, once one of the largest processor of edible oils in the country, came to the block a few months ago after it filed for bankruptcy in December 2017. The firm’s accumulated debt mounted to Rs 120 billion while its sales faltered in the past four years – from Rs 315.6 billion in 2014-15 to Rs 120 billion in 2017-18.
According to the Insolvency and Bankruptcy Code (IBC), a company has 180 days to find a resolution with a 90-day extension – taking it to 270 days. If the lenders fail to find a resolution plan, the company goes into liquidation.
In a bid to avoid liquidation under the IBC, its lenders put the firm on the block earlier this year. Ruchi Soya had attracted over two dozen bids from private equity majors like KKR and Aion Capital and FMCG majors like ITC, Godrej Agrovet and Emami, apart from Patanjali and Adani Wilmar. Industry experts said the firm’s five port-based refining plants was the key reason for bidders’ interest. This is because a large chunk of edible oils are imported into the country through sea ports.
Acquiring Ruchi Soya’s facilities could be a crucial breakthrough for Patanjali that is aggressively expanding its manufacturing capacity with food parks across the country.
After growing by high double digits between 2012-13 and 2016-17, the Ayurveda major hit a road-bump in 2017-18. The group’s top line growth came down to 13 per cent in the year with sales of Rs 120 billion from 111 per cent the previous year.
Its dependence on co-packers or third party manufacturers played a role in its inability to streamline supply, among other reasons, that impacted its business last year, sources from industry said.
Patanjali already has a wide portfolio of edible oils, including mustard oil, sunflower oil, rice bran oil and groundnut oil.