Why is everyone keen on buying debt-ridden Ruchi Soya? All you need to know

Ruchi Soya's Products

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Ruchi Soya Products

 

Edible oil refining gave Ruchi Soya nearly 83 per cent of its top line in the first nine months of 2018-19. Seed extraction, vanaspati production and manufacture of food products were some of the other contributors to its top line for the current financial year. The company’s key brands include Nutrela, which is a range of soya-based products and Mahakosh, Sunrich, Ruchi Gold and Ruchi Star, which are all edible oils. 

 

The Major bidders

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Major bidders for Ruchi Soya

Major bidders fighting for Ruchi Soya included the name of big players such as Adani Wilmar, Patanjali Ayurved, Godrej Agrovet and Emami Agrotech. Adani Wilmar, a joint venture between the Adani group and Wilmar group emerged as the highest bidder with a bid of Rs 60 billion ahead of Patanjali's bid of Rs 57 billion. Patanjali, however, has raised concerns over Adani group's eligibility to bid for Ruchi Soya.

 

Patanjali says Adani is inelegible to bid

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Patanjali says Adani is inelegible to bid

 

Patanjali has, in a letter to Ruchi Soya’s lenders, cited Section 29A of the Insolvency and Bankruptcy Code (IBC). Section 29A states the bidders for an insolvent company need to meet specified eligibility criteria. Specifically, it means a bidder cannot be allowed to offer a resolution plan under CIRP if the bidding company is ‘connected’ to another stressed-loan corporate. Pranav Adani, MD of Adani Wilmar and a relative of Adani Group chief Gautam Adani, is married to Namrata, daughter of Vikram Kothari, the erstwhile promoter of Rotomac group who was arrested by the CBI, in February, after Bank of Baroda complained of a fraud by his company. According to the recent IBC ordinance, approved by the President on June 6, the definition of “connected person” has broadened to include “related party” and “relatives” like members of the family, husband, wife, father, mother and other familial relations, including in-laws. 

 

Ruchi Soya's Financials

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Ruchi Soya's Financials

 

As on December 31, 2017, Ruchi Soya's total debt stood at Rs 120 billion. In four years, the company's turnover has more than halved from Rs 315.61 billion (in 2014-15) to Rs 93.75 billion (first nine months of 2017-18) as the company struggled with its business. If annualised, the 2018-19 turnover of the company works out to Rs 125 billion, which means the drop in top line between FY15 and FY19 is 60 per cent.

 

Why are then big players keen on buying Ruchi Soya?

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Ruchi Soya

 

Analysts and market experts say that a strong portfolio of mass-market edible-oil brands and a ready-made infrastructure of manufacturing plants are the main attractions. Ruchi Soya's edible oil refining capacity stands at 3.3 million tonnes per annum. The Company has around 13-14 refining plants across the country, of which five are port-based. According to experts, Port-based refining capacity makes it easier for companies to refine edible oil imported into the country and 70 per cent of edible oil is imported into India. So, if there is ready capacity available (at ports), players will scoop down to acquire it.

 


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