PATANJALINSEMay 18, 2022

Patanjali Foods Limited

9,568words

92turns

11analyst exchanges

3executives

Download PDF ↗PATANJALI stock page →

Management on call

Sanjeev Asthana

CEO, RUCHI SOYA INDUSTRIES LIMITED

Kumar Rajesh

HEAD (STRATEGIC FINANCE), RUCHI SOYA INDUSTRIES LIMITED

Abhijeet Kundu

ANTIQUE STOCK BROKING

Key numbers — 40 extracted

rs,

, you are audible. Shri Baba Ramdev: First and foremost, my lots of greetings to all the investors, my thanks to all the investors and today is a historical day for Ruchi Soya for doing our track re

Rs. 690 crore

Ruchi Soya, acquisition of Patanjali food business. This is a historical day in itself because in Rs. 690 crore, nearly Rs. 700 crore, we are giving nearly Rs. 4174 crore business on a slump sale basis in just

Rs. 700 crore

n of Patanjali food business. This is a historical day in itself because in Rs. 690 crore, nearly Rs. 700 crore, we are giving nearly Rs. 4174 crore business on a slump sale basis in just Rs. 690 crore. And be

Rs. 4174 crore

s a historical day in itself because in Rs. 690 crore, nearly Rs. 700 crore, we are giving nearly Rs. 4174 crore business on a slump sale basis in just Rs. 690 crore. And before whatever legal process was there

Rs. 5200 crore

the business in Rs. 690 crore on a slump sale basis of Rs. 4174 crore, whose next year plan is of Rs. 5200 crore turnover. It has eight verticals, it consists of staples, which includes all kind of flours, puls

200 crore

atanjali in India and all over world is very high, our reach is to nearly 200 countries of nearly 200 crore people in the world. The Patanjali’s reach is so vast and in that our customer base, especially i

15%

owed to speak only to a limited extent within the legal boundaries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting,

20%

o speak only to a limited extent within the legal boundaries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting, which

30%

e legal boundaries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting, whichever ways you calculate, so this is such a

40%

al boundaries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting, whichever ways you calculate, so this is such a big

50%

daries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting, whichever ways you calculate, so this is such a big step th

100%

. So, I will only say this to my investors, whatever we had committed to you, we have delivered 100%, we said that we will merge biscuit into this and we merged that, we said we will merge food into

Advertisement

Guidance — 20 items

Sanjeev Asthana

opening

“We have nearly 98 – 100 people connected with us on this call, it will be good for everyone if you start the call.”

Sanjeev Asthana

opening

“Your blessings will be there and we will also get your directions.”

Shri Baba Ramdev

opening

“4174 crore, whose next year plan is of Rs.”

Shri Baba Ramdev

opening

“Here all the boards have already given approval to it, now we will also get the approval from the shareholders, so this will be a big step because Patanjali as a brand, its brand equity is very high.”

Shri Baba Ramdev

opening

“And it will be a big step in it and the people who have been associated with us from the beginning in the form of partnership, in the form of investors, it is a big day for them too and the upcoming future is also very big.”

Shri Baba Ramdev

opening

“Since I am allowed to speak only to a limited extent within the legal boundaries but if a business of margin of 15% - 20% is merged together, someone would say 30%, 40% or 50%, is the multiples it will be getting, whichever ways you calculate, so this is such a big step that the investors will gain to a very large extent in the coming future.”

Shri Baba Ramdev

opening

“And we said that in the slump sale, selling with minimum amount to give investors maximum benefit because the greater number of investors associated with us with loyalty, we will be able to progress to a long journey.”

Sanjeev Asthana

opening

“The second is, that consistently we are seeing a growth rate in Patanjali food business for last 3 years and constantly that needle has kept on moving forward, so we are hoping to keep the momentum and in terms of the next year as we follow with the same one.”

Chetan Shah

“If you have any specific thing which you can share will be very helpful, sir.”

Sanjeev Asthana

“So, we are introducing constantly more premium and products to, for a better price realization and very mindful of what we intend to do and this is something which has constantly been a support factor for us but we are now building that up, especially, we have realized biscuits, etc., we need to have a blend of both sides.”

Risks & concerns — 11 flagged

So, that becomes a pass- through, which means that if you are procuring at a higher value, largely you are passing it on to the consumer, so other than the inventory, you know, gain or a negative what might occur, in general, the risk levels in edible oil is only to the extent of the inventory that you hold, in which the prices may move up or down but structurally there is no problem on the edible oil side.

— Sanjeev Asthana

And so that clearly that inflation is putting a lot of pressure on all the biscuit companies and especially because the prices of raw materials have moved up substantially, the price points at the consumer end are very difficult to change, especially in the category of Rs.

— Sanjeev Asthana

The other two businesses which is basically going to be Patanjali foods business and nutraceuticals, there while this pressure remains but the premium that we command and the value that is there, it is fairly healthy, so our ability to absorb the additional raw material cost is significantly better than compared to the biscuits business.

— Sanjeev Asthana

So, in this business also, I do not see any challenge up to 50%, we have already done that.

— Shri Baba Ramdev

So, in this also, we do not have any challenge, no threat, no competition, nothing.

— Shri Baba Ramdev

But we as a premium product, in physical refined oil and Kachi Ghani mustard oil, in which Patanjali is the leader, that is the reason, to compete in these products with others, is not a big challenge for Patanjali.

— Shri Baba Ramdev

So, we have a challenge to change our super distributors over there, it is not that big a challenge, they are good people but they removed money by doing mistakes, so we will remove them from this and will add new super distributors.

— Shri Baba Ramdev

Asthana, now going to Patanjali food portfolio, merging with the Ruchi Soya existing portfolio, the synergy of the distribution resources, synergy of the marketing and sales resources would be an important challenge.

— Bharat Shah

People challenge, managing that synergy together would be an important issue.

— Bharat Shah

Including, one more thing I forgot is the entire structured finance area, like vendor financing, distributor financing, consolidating those position, risk management, treasury management, etc.

— Sanjeev Asthana

Nothing do we want to achieve personally but we have this passion to make India a world level brand and when this passion is there then things are bound to happen even in adverse conditions, at present there are no such adverse conditions and whatever challenge comes by our way we will work with more enjoyment, there are no problems.

— Shri Baba Ramdev

Advertisement

Q&A — 11 exchanges

Thank you for the detailed update, I have two very specific questions; going by the way food prices are going up and there is an inflation pressure and there is also a cost of farming going up, can you give us some color and sense on how do this can have an impact on our business in terms of raw material sourcing, that is the first question. And second question I have about our distribution network, in our presentation the exchange thing which we have mentioned that we are present in some 26 odd states and almost 4.5 lakh retail touchpoints, so sir can you give us some flavor about the town, c

Sanjeev Asthana

So, to answer your question on the food inflation side what you mentioned, that raw material impacts us, so we have got our four businesses which have a direct impact on the food inflation. One is the edible oil, edible oil as you know, is basically a pass-through business, where the prices change virtually every day, in fact three or four times a day. So, that becomes a pass- through, which means that if you are procuring at a higher value, largely you are passing it on to the consumer, so other than the inventory, you know, gain or a negative what might occur, in general, the risk levels in

Hello sir, congratulations to you for executing this in a very rapid and fast manner. Sir wanted to understand on, with the growth of the acquired Patanjali food business going ahead. So, what is the strategy that you are looking at, so you are guiding for 20%, 25% kind of growth next year itself, so what will eb the source of this growth, are we looking at market share gains and what has been the growth in the last two to three years?

Sanjeev Asthana

Okay, so growth typically as we mentioned, that we have done significantly better than the last year. Our growth rates have been nearly 15% to 25% range in last two years and we expect to maintain the same momentum and that is why we are projecting that we should be able to reach 5200 annualized numbers because by the time the food business comes into Ruchi Soya, it is going to be sometime, maybe one or two months, that is one. The strategy is very clear that we continue to expand at levels of a) expanding our distribution, b) launching constantly new products in different product areas and c)

Just wanted to ask one question about the royalty arrangement, this 1% fee will be on the overall gross revenues of Ruchi soya which includes the edible oil part of the business also? Or is it just on the categories which are being transferred from Patanjali to Ruchi Soya in this transaction?

Kumar Rajesh

So, this 1% is on the item transferred from the Patanjali to Ruchi soya only, they depend on turnover of that items, not on overall basis. Okay, so our existing edible oil business, etc., that turnover is not included in this calculation. No, that turnover will not be included.

First of all, congratulations for a remarkable kind of a portfolio, which has been graciously handed over to Ruchi. I read with lot of interest, that this food portfolio which has been transferred, would grow at the rate of 25% and more over next many years. So, I wanted to understand, is this a reasonable assessment or are we being a bit more ambitious?

Shri Baba Ramdev

Mr. Bharat, I will say two, three things. Like Amla-Aloe vera juice which is our very high profit product, is a part of people’s everyday life. Like many people’s morning starts with tea, coffee, similarly many people start their day with Amla- Aloe vera juice. And we are the first one in India to make Amla- Aloe vera juice and also to make people drink it. Amway like companies used to sell it earlier, but it was very limited. No one used to sell Amla juice at all to the masses, we brought the Amla-Aloe vera juice. So, in this we can add many more people, to add new customers to it is not a pr

Sir my question was the way in which Ruchi Soya and Patanjali Foods is growing, like I heard in one channel where Swamy Ji was telling that this company’s sale can go up to Rs. 1 lakh core in the future. In the coming 2-5-10 years this can happen and its your vision. Sir, can you comment a little bit on your team. I know your team comprises of very talented people Ram Bharat, Sanjeev Kumar and Sanjeev Khanna is there but when the company will expand to this extent then I am sure that you will want to strengthen your team more.

Shri Baba Ramdev

I will give a very short answer to your question. Today also our team right from CEO & MD we have very talented people. I have already started working on scrutinizing for manpower for the past 6 months. So, from standpoint of exports to lead the food business, leading nutraceuticals and the rest capable leaders who have excellent experience, who are excellent performers and nationally and internationally the known people are there, we are already working on scrutinizing for them. Around 2-3 people will be joining us and 4-5 people are in the pipeline who are at a very big level. Whose package

Hello Sir, actually I have few questions. My first question is, what will happen to Patanjali’s personal and body care products, like soaps, shampoos, body lotions, are they also getting transferred?

Shri Baba Ramdev

No. Not any medication, no any herbal cosmetic. This is a separate business and Patanjali Ayurved will run it and its value today is already more than Rs. 1,00,000 crore. There should not be so much freebies that people take advantage of it. So, how much we have given is too much, that is entirely a different program. Okay and sir another question is, there are some products which are common under both the companies like cooking oil, like if you think about Soya chunks, Ruchi has its own brand of soya chunks and Patanjali has its own brand. So, sir what are your plans regarding the consolidati

Hello, Swamiji. Sir, first of all, I would say that it is not madness, I would say you are very passionate. The craze that you had for doing business and in fifteen years you have done and proved it, we can see that either our Honorable Prime Minister Mr. Modi has done it or you have done it that how do bring up the rural economy and how to give growth to our Agriculture. Sir my question is, the Palm oil business plans that we are doing, so will our quality and foreign countries’ quality will be the same? Otherwise, is their cost price less, so that they can give it on a very low price?

Shri Baba Ramdev

We are already doing on 1.5 lakh acre land and will do on 15 lakh acre land and our quality will be better than Indonesia, Malaysia, our oil is good, our air-water is good and no one can threaten us. Indonesia, Malaysia keeps threatening us in between, sometimes they talk rubbish on Kashmir, sometimes rubbish about here and there, sometimes they threaten that they will stop supplying. Now also, they are doing something work in disorderly manner, so Patanjali, Ruchi Soya is going to do a very big work in the direction of making the country Atmanirbhar in edible oil. So, in any ways, price, etc.

Hello Swamiji. My best wishes to Patanjali group for this. I have a small question; in which quarterly financials can we expect these figures on the sheet for this merger?

Sanjeev Asthana

On the second quarter, we are reasonably expecting but, if I understood your question right, we are expecting this should take about two months. So, next quarter, quarter two onwards, I think we should be there, sometime by middle of July. Alright, and how is the Palm oil revenues from the Palm oil’s plantation, that will be coming into the company, when can you expect that? So, Oil Palm plantation is very much a Ruchi business only. Patanjali has no Oil Palm plantation business, so that is in the Ruchi, continues to remain and we continue to expand in the area plan, etc. as Swamiji has mentio

Good evening, Baba ji and Sanjeev ji. Sir my question is on the plantation of Palm. So, today our margins are 6%, assuming if we plant from India only, what will be our margin in the oil business, in the edible oil business? Like, of course, we will save on price, we will save on lot of things. Will we buy it at the market price from the farmers? How will that plantation business work, just trying to understand?

Sanjeev Asthana

So, I can quickly explain, Plantation business is a Tripartite arrangement between the farmer, the government and the company and there is a fixed formula which is defined by CACP, which is the commission on agriculture, cost and prices, which takes in the monthly prices, C&F kind of basis of international prices, the oil extraction rate that we get and how the farmer that would deliver, basis that there is an almost an assured margin construct that we have in the business and that margin construct is quite handsome. So, it is more back-ended return as we get but once the plantation starts to

Yes, good afternoon. My question is with respect to the brand equity. So, whether the Patanjali brand is a part of the commercial agreement? And if no, then what is the commercial agreement between Ruchi Soya and the parent company with regards to the usage of Patanjali brand?

Kumar Rajesh

Yes, Patanjali brand itself we have a separate agreement as a brand license agreement in which Ruchi soya will pay 1% of turnover of the product which have been transferred to the Ruchi Soya from PAL and this arrangement we have made separately. Okay, so this is 1% of the product complete. Yes, which is being transferred, this is not a part of …. Yes, this is the commercial agreement, not the part of the PTA. Yes, not the part of the PTA. Okay and to the only turnover which is attributed to the products of PAL. Yes.

Thanks a lot Shri Baba Ramdev Ji and the management of Ruchi Soya; Mr. Asthana, Mr. Rajesh for giving us the opportunity to host the call and thanks to all the participants for attending the call. Thanks a lot.

Shri Baba Ramdev

Thank you to the entire team of Mr. Kirti and thank you all for your wishes, I appreciate it and all the investors who have given so much of their time and participated with so much of love, thanks a lot. Thank you and good day to all.

Speaking time

Shri Baba Ramdev

Sanjeev Asthana

Moderator

Kumar Rajesh

Amit Jeswani

Varinder Bansal

Bharat Shah

Rishabh Shah

Narendra Porwal

Abhijeet Kundu

Advertisement

Opening remarks

Abhijeet Kundu

Dear participants, welcome to the Ruchi Soya Conference Call. This is regarding the acquisition of Patanjali Ayurved Limited Food Retail business by Ruchi Soya. We have with us the management, Shri Baba Ramdev ji and the management of Ruchi Soya represented by Mr. Sanjeev Asthana, who is the CEO and Mr. Kumar Rajesh, who is the Head – Strategic Finance. We will start with the initial remarks from the management and then we can proceed with the questionnaire.

Sanjeev Asthana

I would request respected Swami ji to start with the opening remarks. We have nearly 98 – 100 people connected with us on this call, it will be good for everyone if you start the call. Your blessings will be there and we will also get your directions.

Shri Baba Ramdev

First and foremost, my lots of greetings to all the investors, my thanks to all the investors and today is a historical day for Ruchi Soya for doing our track record, our performance, our strategic plan. With this so many things in Ruchi Soya, first our turnover, our EBITDA, total turnaround of our business and corporate governance, professional management and transparency, accountability, ownership, everything is going very well in Ruchi Soya and now today is a very special day for Ruchi Soya, acquisition of Patanjali food business. This is a historical day in itself because in Rs. 690 crore, nearly Rs. 700 crore, we are giving nearly Rs. 4174 crore business on a slump sale basis in just Rs. 690 crore. And before whatever legal process was there for both the companies, for which a committee was formed for the complete acquisition of the business. Finally, the board has given permission today that we are giving the business in Rs. 690 crore on a slump sale basis of Rs. 4174 crore, whos

Sanjeev Asthana

I will just take brief for a couple of minutes, just add to what Swami Ji has already said and give some specific details. So, my name is Sanjeev Asthana and I am giving you the details of what occurred today and I will just take a few minutes and then the floor is opened and we are willing happy to answer any questions. So, basically what we are moving is, the food’s business with 536 SKUs that has spread across 8 product categories, like staples, edible oils, beverages, spices and condiments, cow ghee, honey herbal products and dry fruits and there are some marquee products, like for example cow ghee more than Rs. 1000 crore a year, similarly Chyawanprash, similarly Aloe vera juices, Patanjali Honey. So, there are lot of good and solid products and product lines which are moving, this is one part. The second is, that consistently we are seeing a growth rate in Patanjali food business for last 3 years and constantly that needle has kept on moving forward, so we are hoping to keep the

Kumar Rajesh

Almost all the things have been explained by you sir and there is nothing I want to explain. But I would like to just highlight one point, we are taking over this business under the slump sale methodology and one thing I would like to highlight before you all, that we are not taking any bank loan, any creditors, I mean to say that we are not taking any liability, except for some liability of PF and gratuity pertaining to the employees. So, this is the undertaking consisting of only and only assets, land, building, plant and machinery and inventories, infrastructures.

Advertisement

← All transcripts PATANJALI stock page →

Patanjali Foods Limited

Market Movers