The loan to Patanjali Ayurved
comes a few weeks after CARE Ratings withdrew its rating on the firm in October.
On October 24, CARE said it reaffirmed and withdrew the outstanding ratings of ‘CARE A- (Single A Minus) (credit watch with developing implications)’ assigned to the bank facilities of Patanjali Ayurved
with immediate effect following the consumer company's request and ‘no objection email’ received from the bank(s) that had extended the facilities rated by CARE.
In the first week of October, CARE had downgraded ratings on Ruchi Soya’s long-term bank facilities by two notches to A-.
On October 17, CARE had placed the rating on “credit watch with developing implications” on account of the sizable Ruchi Soya
acquisition of Rs 4,350 crore, which constitutes 151 per cent of Patanjali Ayurved’s net worth as of March 2019.
It had said that the rating to the bank facilities of Patanjali Ayurved derives strength from the market position of the company. It was supported by its established brand position, its widespread retail distribution network, diversified product portfolio and experienced management team.
But these rating strengths are offset by expected weakening of its financial risk profile on account of expected large outflow of funds from Patanjali Ayurved to Patanjali Consortium Adhigrahan Pvt Ltd — the special purpose vehicle created for the purpose of acquisition of Ruchi Soya Industries.
The rating had factored in the company’s higher exposure by way of loans and advances, and equity investments to the group entities. Patanjali Ayurved continues to be the largest corporate entity in the Patanjali group and hence a sizable load of the Ruchi Soya acquisition (excluding debt from banks) will be borne by it.
Further, the dependence on the brand image of its founders and intensifying competition in the FMCG, herbal and ayurvedic products are also key areas of concern. It also said the funding pattern of raising Rs 900 crore to be infused into the SPV by the company for acquisition of Ruchi Soya remains to be seen.