Adani group emerges as highest bidder with Rs 60-bn offer for Ruchi Soya

Billionaire Gautam Adani's group company today offered about Rs 60 bn to emerge as the highest bidder for acquisition of bankruptcy-hit edible oil firm Ruchi Soya, sources with direct knowledge of the matter said. Baba Ramdev-promoted Patanjali Ayurved, the only other qualified player in the race, has bid for around Rs 57 bn, they added. However, Patanjali will have a right to match the offer under an auction being done under so called Swiss challenge method. 

The Committee of Creditors (CoC) of Ruchi Soya, in its meeting held today, opened the bids submitted by the two contenders -- Patanjali group and Adani Wilmar, which sells cooking oil under the Fortune brand. The CoC has decided to conduct Swiss challenge method to maximise the asset value of Ruchi Soya. When contacted, Haridwar-based Patanjali spokesperson did not disclose the bid value. However, he raised question over the neutrality of the process citing the media reports of resignation of law firm Cyril Amarchand Mangaldas as advisor of Adani Wilmar. The law firm is also advising the Ruchi Soya's resolution professional.

Ruchi Soya second-round bidding on Jun 11; Patanjali to submit revised bid

Baba Ramdev-promoted Patanjali Ayurved, which is in the race with Adani group to acquire bankruptcy-hit Ruchi Soya, is likely to submit a revised bid tomorrow as lenders of the edible oil firm have decided to hold a fresh round of resolution process between the two contenders to maximise asset value. 

The Committee of Creditors (CoC) in its last meeting held on May 30 had set the stage for an aggressive bidding between the two suitors for Ruchi Soya to maximise the value of the assets, sources said, adding that the COC in consultation with the independent evaluator has decided to adopt a Swiss challenge. According to sources, Patanjali group has submitted its undertaking of having no objection to the 'Swiss Challenge' process adopted by the lenders. When asked about the development in the bidding process, Patanjali spokesperson S K Tijarawala said: "Whatever process is being adopted by the CoC, we will follow it."

Is Patanjali's FY18 Rs 20,000 crore revenue target realistic?

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.
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