Taking on FMCG giants on home turf

Patanjali bagged the edible oil maker Ruchi Soya with Rs 4,325cr bid. Ruchi Soya was heavily indebted with loans of Rs 9,345cr to lenders like SBI, Central Bank, PNB & Standard Chartered and was put on insolvency auction. Patanjali won a protracted contest where it first delayed the deal and then outbid Adani Wilmar when the latter cited that Ruchi Soya was losing value due to the delay!

Patanjali hits a snag
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Patanjali is an innovative & fast emerging FMCG company (with a turnover of Rs10,000cr). It had clocked 111% growth in turnover 2016-17, which dropped to marginal growth in 2017-18 after demonetization and GST. Its ambition was to rapidly scale up to Rs 20,000 to 25,000cr turnover. The slowdown is bad for Patanjali as it needs to become a dominant player before others start to challenge it on its core Ayurvedic offerings. Lack of strong distribution channels is holding back the sales growth in the core business whilst it had entered new sectors where it is still vulnerable.

What is special about Ruchi Soya?
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Ruchi Soya is in the business of refining, processing and packing edible oils and has 14% of Indian market share (2nd to Adani Wilmar which has 19%). It had already signed various deals with Patanjali. Now, Ruchi Soya can make exclusive sales and distribution arrangements for the entire range of Patanjali edible oils, in large packs. Ruchi Soya can help to process Patanjali's other foods and agri-products. It can dramatically increase the market presence of Patanjali products, increase their brand value and push sales while Patanjali retains a strong brand recognition.

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