Swami Ramdev has a plan to help Patanjali overcome its recent troubles

The Rs 45,000-crore Patanjali group is going through a tough time dealing with sluggish revenue growth and strictures from courts for misleading ads. But maverick yoga guru Swami Ramdev has a fresh growth recipe

Photos by: Hardik Chhabra

It’s a typical June afternoon in Haridwar. The sun is blazing down from a hot and copper sky, and the 
43° C temperature has kept most people indoors. The occasional breeze lifts dust. After a tour of the Patanjali Research Institute near Bahadrabad in Haridwar, Uttarakhand, we are headed along the Delhi-Haridwar highway to the Patanjali Foods & Herbal Park in Mustafabad village, some 25 km away. But Swami Ramdev’s convoy disappears in a cloud of dust as his Range Rover shoots off along the narrower local road. 

Who would have thought that Swami Ramdev was a speed demon? Maybe sitting in a Range Rover (with a top speed of 290 kmph) with Z-category security does that to you. Or maybe it’s the yoga guru’s way of signalling his intent to double his Patanjali group’s turnover to Rs 1 lakh crore in just four years.

“ [We already have over 74,376 hectares under cultivation]… The oil palm plantation business represents a key avenue for the long-term growth of Patanjali Foods ”

 

SANJEEV ASTHANA
CEO 
Patanjali Foods

Patanjali Ayurved, co-founded by Swami Ramdev and Acharya Balkrishna in 2006 to make chyawanprash and ayurvedic products, had hit a turnover of nearly Rs 2,000 crore by 2015. Group turnover soared to Rs 5,000 crore on Patanjali’s entry into the FMCG business using the Ayurveda and health plank and a franchisee model. Some corporate reengineering created a three-company group—Patanjali Ayurved, Patanjali Foods and Patanjali Gramodhyog. In FY24, the group reported a turnover of Rs 45,000 crore. The yoga guru recounts how people had sneered at him. “When we set revenue targets like Rs 10,000 crore or Rs 20,000 crore, people could not digest it. Now...[those] people are incredulous,” says Ramdev, also the Non-executive Director of Patanjali Foods. 

Chatting with us at the Patanjali Foods & Herbal Park, he talks of his next big dream: group turnover of Rs 1 lakh crore by 2028. That’s, like, more than doubling the group revenue in four years. Patanjali Foods was India’s third-largest FMCG company last year. Hindustan Unilever (HUL) was India’s largest FMCG firm in FY24, with revenues of Rs 62,707 crore. It was followed by Adani Wilmar.

Is that a highly ambitious target, even by Ramdev’s standards? Patanjali Ayurved grew 50-90% yearly from a few hundred crore in FY13 to Rs 9,187 crore in FY17. 

What’s Ramdev’s formula for growth this time? “In the coming days, we will increase our market share, grow our exports, and make some acquisitions in consumer goods,” he says. But will it be as easy as it sounds, especially since the two Co-founders are facing the heat of the regulators and the Supreme Court on matters relating to their core belief in Ayurveda?

Miscommunication or Misleading?

The Supreme Court’s strictures have hurt Patanjali’s image. In August 2022, the Indian Medical Association (IMA) filed a writ petition in the apex court, alleging that Patanjali Ayurved has been ‘misleading’ the public with its ‘false claims’ about having cures for diabetes and high blood pressure. The matter went up to a two-judge bench, which found the advertisements to be ‘prima facie’ misleading, and Patanjali Ayurved had to promise it would not publish such claims. But it published such ads again. The bench then asked Balkrishna, MD of Patanjali Ayurved, and Ramdev to show cause why they should not be punished for contempt of court. The duo furnished an unconditional apology, and the court let matters rest.

“ [The] legal actions against them have not reflected very well on Patanjali... Ramdev’s plans to list two to three other group companies on the market are also on the back burner ”

 

ARUN KEJRIWAL
Founder 
Kejriwal Research & Investment Services

Industry watchers say the court battle has dented the image of Patanjali, Ramdev, and Balkrishna and compelled them to delay plans to list any group firm. Arun Kejriwal, Founder of Kejriwal Research & Investment, says, “These legal actions against them have not reflected very well on Patanjali... Ramdev’s plans to list two to three other group companies on the market are also on the back burner now.”

IMA office-bearers were not available for comment. But Dr Anoop Misra, Chairman of Fortis C-DOC Centre of Excellence Hospital in Delhi, which specialises in managing diabetes and endocrine disorders, blames the Patanjali group for the ambiguity of its research. “Their claims have not been founded on solid science and have faced legal criticism. Most importantly, their claim to ‘cure’ or ‘manage’ type 1 diabetes without insulin, which they have stated several times, can lead to serious problems and even death of such patients,” he says.

The stakes are high. Experts estimate that the diabetes and pre-diabetes care market in India will reach about $34 billion in 2026.

Ramdev is unfazed. Taking us around the research facility at Patanjali Research Institute (part of the Patanjali Research Foundation) he says its research facilities are not only top-notch but the institute has already published dozens of papers in “high-impact” journals worldwide. The institute has four key divisions: drug discovery and development, herbal research, Sanskrit and Ayurveda, and clinical research. “This is the world’s largest institute that researches yoga, Ayurveda and herbal products. We follow over 5,000 research protocols... [and] even conduct animal trials of our drugs.” 

However, allopathic specialists like Misra are not impressed. “The main issue is the lack of quality control. These drugs must undergo clinical trials like modern drugs, including experimental animal studies, followed by phase 1 to 3 trials and post-marketing surveillance. Rigorous testing and randomised trials are needed... Unfortunately, many of these standards have not been achieved,” he says.

On Patanjali’s skirmish in the Supreme Court, Ramdev says the company is the victim of “flawed and outdated legislation” and a pharma mafia, and the issues are not with its product quality and messaging. The yoga guru is readying a challenge to the Drugs and Magic Remedies (Objectionable Advertisements) Act of 1954, under which it was pulled up. 

“ The main issue is the lack of quality control. These (Patanjali’s) drugs must undergo clinical trials… many of these standards have not been achieved ”

Dr ANOOP MISRA
Chairman
Fortis C-doc Centre Of Excellence Hospital

“Our quality standards have been falsely targeted by a mafia. There is a corporate mafia, a political mafia, an intellectual mafia, and a drug mafia, too. We are their target all the time,” says Ramdev. He hits out at MNCs, particularly Colgate and Nestlé, and has even publicly castigated them in the past.

Harish Bijoor, a brand strategy expert, is not overly worried about these issues. They may not have dented Patanjali’s image in the eyes of those who think that MNCs do not want Ayurveda to succeed, he says. “While the whole incident of tendering an apology by the Co-founders may have sullied Patanjali’s image, there is a whole segment of people who see this as a play by multinational pharma giants, who do not want the natural, eastern, Ayurveda to succeed.” 

The FMCG Tag

Patanjali is no stranger to trouble. After growing strongly till FY17, sales of its flagship Patanjali Ayurved declined in FY18, going down by 11% year-on-year to Rs 8,176 crore from Rs 9,187 crore. Market watchers say it reported a sharp sales growth up to FY17 by offloading its inventory on distributors. Only in FY21, after it acquired edible oils maker Ruchi Soya for Rs 4,350 crore in a bankruptcy court sale did the group enter the top league with a revenue of Rs 30,000 crore. (Ruchi’s turnover was Rs 16,383 crore.) Then, after Patanjali Ayurved handed over its foods and related businesses to Ruchi and renamed it as Patanjali Foods, revenues grew to Rs 31,962 crore in FY24.

Patanjali Foods is the third-largest FMCG player—but based on what consumer goods? It gets 70% of its sales from edible oils, which it got with Ruchi. Edible oil prices fluctuate wildly. In FY24, for instance, when edible oil prices fell by double digits after surging for two years, Patanjali Foods’ revenue remained flat: its edible oil sales declined 12.7% from Rs 25,634 crore in FY23 to Rs 22,384 crore in FY24.

Also, India imports more than 80% of its crude edible oil to refine for domestic customers. Geopolitical tensions such as the Russia-Ukraine war and shipping disruptions often lead to supply shortages. 

To hedge against the risk, Patanjali has already transferred the foods businesses of Patanjali Ayurved to Patanjali Foods, increasing the share of the foods & FMCG business in the company from 6.84% in FY22 to 19.49% in FY23 and 30.06% in FY24. In FY24, the foods business kept Patanjali Foods’ top line in the black, growing 55% year over year to Rs 9,643 crore.

On July 1, Patanjali Foods initiated the acquisition of Patanjali Ayurved’s home and personal care (HPC) portfolio, comprising hair, skin, dental and home care products. Some of these are strong brands, such as Dant Kanti in dental care, Soundarya in skincare and Kesh Kanti in hair care. Patanjali Foods CEO Sanjeev Asthana had said in an earnings call in May, “…we’re evaluating the acquisition of Patanjali Ayurved’s HPC portfolio” and assessing “strategic synergies”. The deal involves Patanjali Foods paying Rs 1,100 crore to Patanjali Ayurved against “all movable assets, immovable properties, contracts, licences and employees” related to the portfolio, said a release. Plus, as a part of the agreement, Patanjali Foods would pay 3% of the portfolio’s turnover to Patanjali Ayurved for 20 years. While, the revenue potential of the portfolio is not specified, estimates suggest it would be a chunk of the Patanjali Ayurved’s Rs 6,991-crore sales in FY24. 

“ It (Dant Kanti) is a wonderful success. Patanjali has some terrific products cum brands. These products need to be pushed more by Patanjali ”

 

HARISH BIJOOR
Brand Strategy Expert

According to Kejriwal, edible oil processors always run the risk of commodity price variations, so it would be a good move for Patanjali to create an FMCG conglomerate. “The acquisition shall strengthen the company’s existing FMCG product portfolio with an array of marquee brands and also contribute to the growth in terms of revenue and Ebitda”, Patanjali Foods said in a release. 

Patanjali Foods is focussing on oil palm plantations, Asthana had said, and already has over 74,376 hectares under cultivation across 12 states. “The oil palm plantation business represents a key avenue for the long-term growth of Patanjali Foods,” Asthana had told analysts.

Profitability remains another challenge. Patanjali Ayurved, the group’s largest entity till FY20, has never delivered profits beyond Rs 750 crore, even when it clocked its highest-ever sales of Rs 10,732 crore in FY22. From a low of 4.1% in FY18, its net profit margin has grown to 7.67% in FY23. Its FMCG competitors have net profit margins that range from 13-24%. For Patanjali Foods, now the group’s largest company, the figure was 2.39% in FY24.

Ramdev Has a Plan

According to Ramdev, the management has learnt some lessons in the past few years. For one, it has a mechanism to tackle the fluctuations in edible oil prices. “The results will be reflected in the first quarter numbers,” he says.

Then, transferring more FMCG items from Patanjali Ayurved to the listed Patanjali Foods will also help it offer better returns. It transferred the foods businesses to test the waters and is now integrating the other FMCG businesses. “Our retail or institutional investors’ interests should not be affected in any form,” says Ramdev. After the second round of integration, Patanjali Foods may get a new, more ‘universal’ name.

A senior market analyst says that while cash profit may be low in edible oils, Patanjali is improving its return on capital employed (RoCE). After clocking 16.6% RoCE in FY22, it came down to 11.2% in FY24. But Antique Stock Broking estimates Patanjali Foods’ RoCE to grow to 16.8% in FY25 and 20.3% by FY26. Market leader Adani Wilmar, which has a share of nearly 20% in the 
Rs 3 lakh crore domestic edible oils market, saw its RoCE decline to 7.2% last year. “Apart from the edible oil segment, Patanjali Foods has expanded its FMCG and food products’ manufacturing capacity,” says the analyst. 

According to analysts, Patanjali’s focus on growing its distribution through general and modern trade has begun to bear fruit. Starting with Patanjali Chikitsalaya, its ayurvedic medicine store, Patanjali’s reach has grown to over a million retail outlets in FY24. Dhiraj Mistry, a Research Analyst at Antique, notes, “The company is gaining market share in the biscuits portfolio by outpacing industry growth with more and more direct reach outlets.” But Ramdev has another plan to improve margins: strengthen its grip on upmarket consumers.

“With over 700 million consumers in India, we have already reached the masses. Now it’s time to cater to the classes,” Ramdev says. Patanjali has ventured into the premium FMCG market. Starting with sports nutrition and nutraceutical products under the brand Nutrela, dry fruits, premium biscuits and ghee, it is expanding into premium categories like shower gel and bath soaps. Asthana said the company is shifting focus to the high-margin FMCG business. Mistry says the FMCG business’ performance is expected to be sustained, with management focussing on driving growth through distribution expansion and new product launches. “The company [will] emphasise on premiumisation, [and] a diversified product range, and broaden its distribution channels to drive growth,” he notes. 

Experts like Bijoor say Patanjali should now focus on leveraging its popular brands like Dant Kanti. The herbal toothpaste brand is already No. 3 in India’s market after Colgate and Dabur Lal. “It’s a wonderful success. Patanjali has some terrific products cum brands. These products need to be pushed more by Patanjali,” he says. 

Taking a cue from the market, the company has recently launched Dant Kanti Gel, which sells at a premium and lures younger consumers through its brand ambassadors Tiger Shroff and Tamannaah Bhatia. To aid the distribution of its premium portfolio, Patanjali has grown its branded modern trade outlets, like Patanjali Mega Stores, to close to 400 across dozens of cities.

Patanjali Foods is key to Ramdev’s goal of achieving Rs 1 lakh crore in revenue: Rs 50,000 crore will come from it alone. It is also targeting exports. Products like Nutrela soya chunks and skin and hair care are being tried out abroad, while the Dant Kanti brand is being exported to over 50 countries. The rest would come from its current businesses and acquisitions in FMCG. Achieving the goal by FY28 would require its existing business to grow at 19% CAGR, which looks improbable. Tool: major acquisitions.

Ramdev says Patanjali plans to “enter a few new sectors soon, which will attract the world’s attention. Something out of the box”. “When we bought Ruchi Soya, critics said it’s a commodity business, an elephant. How will it run?” he recalls. Ramdev is betting on India’s economy and says sectors like agriculture and FMCG are huge. Then there are areas like health, education and research, he says.

Experts say Patanjali has gained by hiring professionals to steer the company. Apart from being efficient, professionals ensured corporate governance and transparency. Ramdev says one doesn’t have to tell professionals how to get things done. “But there are few who can come up with new ways of doing things,” he says. For that, there is Swami Ramdev.