Ruchi Soya FPO to open tomorrow; here's what brokerages have to say

Edible oil and food products majors Ruchi Soya Industries is set to launch its follow-on public offering (FPO) on Thursday to garner Rs 4,300 crore. The company has fixed a price band of Rs 615-650 for the public offer. The issue will close on March 28. Brokerages on Dalal Street gave subscribe rating to the issue for the listing and long-term gains.

The company is one of the leading players in the edible oil business and forays into various business verticals with diverse product portfolios such as wheat flour, honey, biscuits, rusks and breakfast cereals and noodles, among others. It is also one of the leading players in soya products.

Brokerage KR Choksey Shares and Securities is positive on the FPO. It believes that Ruchi Soya is drawing synergies post its acquisition with Patanjali which has led to favourable changes in the company’s business model. Being a pioneer in the soya products and edible oil business, the company’s focus on diversifying its product portfolio beyond oils will help it emerge as a strong player in the category.

“Ruchi Soya has focused on integrating its operations to build a value chain and improve its operational efficiencies. Further, the majority of the debt will be paid from the proceedings of the FPO while the remaining amount will help the company to meet its working capital requirements,” KR Choksey said in a report.

“At the upper price band of Rs 650 per share, the FPO is available at 40 per cent discount to the company’s current market price. The industry is valued at TTM PE of 31.5x and Ruchi Soya’s TTM PE multiple is 33.5x while the FPO is valued at a multiple of 21x. Hence, we recommend ‘Subscribe’ for the listing and long-term gains for this FPO,” the brokerage said.

On the other hand, Aayush Agrawal, senior analyst, Swastika Investmart said, “The post-issue market capitalisation will be Rs 22,494-23,530 crore with an equity dilution of 18.25 per cent-19.11 per cent. It has a strong backup from the Patanjali group and we are seeing a turnaround in the company where it managed to turn profitable.”

He further added that PE of around 32x is lower than the industry average.  

“Patanjali group wants to make this FPO successful so that they can come out with more FPOs successfully whereas they are also likely to come out with IPOs of their other segments. We have a neutral rating for this FPO however aggressive investors can apply for the long term,” said Agrawal.