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The curious case of Ruchi Soya

Ruchi Soya has been in news for all good reasons! The stock has rallied over several thousand % points since Feb 2020.

The closing price on 1st Feb 2020 was Rs 21.55 and the closing price on  26th June 2020 was Rs 1519.65. Check out the mind-boggling chart below.

img source – google finance

Let’s discuss how they got here in less than 6 months.

The company was founded in 1986 in Indore, MP. The company engages mainly in manufacturing and sales of edible oils of various kinds and soya food. It majorly serves Indian markets.

As per Wikipedia – Ruchi’s wide range of food products include cooking oils, soy foods, vanaspati, and bakery fats. Nutrela is the largest selling soya food brand in the country, with more than 50% market share. The two vanaspati brands, Nutrigold and Ruchi No. 1 are regional leaders in their respective categories. It also manufactures the soap brand Ruchi No. 1, available in four variants.

The company was doing decently well.

But it got into some trouble and had filed for bankruptcy and later got acquired by Baba Ramdev’s Patanjali group. The group completed the acquisition in Dec 2019. Patanjali Ayurved acquired the company for Rs 4350 crore. (source)

After the acquisition, the Patanjali group notified the stock exchanges BSE and NSE that it has reduced the Equity share capital of the existing shareholders by 99 percent. It means those who were holding 100 shares of the company now have 1 share. (source)

So as per the above statement, they get to hold 99% of the company.

Current promoters holding as per MoneyControl is 99.03 percent. The same promotor holding prior to acquisition in the quarter ending September 2019 was 15.53%.

In exceptional cases, SEBI would alow promoter holding over 75%. SEBI requires a minimum holding of 25% by the public. In this case, Patanjali has agreed to sell its stake within 2 years.

Have you read about this stock ELCID investment which is trading below rs 10 and is worth about 1 lakh rupees?

Financials:

  • The companies finances have remained more or less constant. The companies sale in the last 5 quarters has been range-bound.
  • The book value of the company is Rs -169.99 (negative)
  • And the P/E is 1,160.04
  • Patanjali acquired the company for Rs 4350 crore and the current market cap is 44,592.11.

Just wondering what will happen when the Patanjali group starts selling the stake?

This is a forward which I got on WhatsApp earlier today. For fun only..

To me, it’s a bogus rally.

Just crazy! 

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