Ahead of the FPO, the company on Wednesday raised Rs 1,290 crore from anchor investors. The offer is entirely a fresh issue of shares.
At the higher end of the price band, Ruchi Soya is asking for a P/E multiple of 34.8 times based on H1FY22 annualized post-issue fully diluted EPS against an industry average of 65 times.
“It appears that the FPO would sail through. The anchor investment participation also encourages the Street. More importantly, such types of businesses are attracting more and more investors. You look at Adani Wilmar IPO listing and post that the rally has been sort of exclusive “Ruchi Soya itself is a market leader in terms of its brand Ruchi Gold. Besides, it is a key player in the soybean market, soybean mustard oil and all such stuff,” said Devang Mehta, Centrum Wealth Management.
Shares of Ruchi Soya have fallen 17 per cent in the last five sessions. Still, they are up 32 per cent in the last one year. Adani Wilmar, which got listed in February this year, has raised 78 per cent over its issue price of Rs 230.
Mehta said while there is investor interest, there is also high inflationary pressure.
“There is so much pressure on the interest rates and commodity prices are rising. But some companies would command the leadership position because they are market leaders in their own right,” he said.
Patanjali owns a 98.9 per cent stake in Ruchi Soya and post the issue, its shareholding in the company will reduce to 81 per cent. It needs to cut this further to 75 per cent to comply with minimum shareholding norms.
“Considering Ruchi Soya’s strong brand recall, wide distribution, better financial track record and healthy ROE, we have a positive view for the FPO. It is recommended to “subscribe” the issue from the long term perspective,” said Ashika Stock Broking.
Astha Jain of Hem Securities said the FPO price band of Rs 615-650 per share suggests a PE multiple of 28 times on pre-issue FY21 EPS basis.
Jain said the company with upstream and downstream integration is one of the key players in oil palm plantation and has developed an effective strategy to procure the key raw materials required for business.
“Also the company’s products enjoy strong brand recognition in the Indian market and benefit from an established and extensive distribution network. The company has forayed into the health and wellness space with the launch of nutraceuticals and is a pioneer and market leader in branded TSP space. We recommend “Subscribe” on the issue,” Jain said.
Ruchi Soya has high debt on the books and it is looking to utilize a major portion of FPO proceeds for repayment of its 80-85 per cent debt in the next few months, said Religare Securities.
Sanjeev Kumar Asthana, CEO at Ruchi Soya said that his company plans to withdraw almost Rs 3,300 crore and that his company will be left with very minimal debt, partially towards working capital. “Debt component of the company’s balance sheet will be negligible. The basic idea being that the company has to be debt-free as early as possible,” he said.
KRChoksey Shares & Securities also has a subscribe rating on the issue for long term gains.