Ramdev's Patanjali to invest Rs 5,000 cr in 500 days to boost production

Yoga guru Ramdev's company has Rs 320 crore debt, of which Rs 300 crore is fund based

After bombarding the domestic market with a slew of product launches during the past two years, televangelist Ramdev’s Patanjali is padding up for another blitzkrieg, with a series of greenfield manufacturing facilities across the country. 

Fast-moving consumer good (FMCG) major Patanjali has set an ambitious target of starting production in at least four new facilities with an investment of Rs 5,000 crore in 500 days, Chairman and Managing Director Balkrishna told Business Standard.

While Patanjali had been funding most of its requirements from internal accruals, it is now looking to borrow from banks. 

The fast-growing company that thrives on swadeshi (domestic) is desperate to expand its production capacity to meet growing demand for its products. 

During the past few years, a phenomenal growth in sales (at 82 per cent CAGR during 2011-12 and 2015-16) has forced it to depend on third-party manufacturers its food park at Haridwar has become over-utilised. 

High dependence on outsiders for sourcing finished products could hurt its margins in coming days, analysts said.

According to a note published by credit ratings agency ICRA, “The ramp-up for facilities will increase reliance on external debt, which is expected to result in some increase in the gearing level. These facilities, once operational, are expected to drive the company’s future revenue growth”. 

Apart from the large amount, which will be tough to meet from internal accruals in the short span of 16 months, borrowing money from banks has also become an easier proposition for Patanjali as ICRA upgraded its credit rating for fund-based facilities by two points – from “A minus” to “A plus” – recently. 

Currently, Patanjali has a debt of Rs 320 crore, out of which Rs 300 crore is fund based.

The Project 500 encompasses food and herbal parks that Patanjali plans to build in four locations — Gautam Budh Nagar (Uttar Pradesh), Nagpur (Maharashtra), Tezpur (Assam) and Indore (Madhya Pradesh). While, the facility at Assam is expected to be underway by March, the other three food parks will start production by mid-2018.

The food park at Uttar Pradesh, expected to cater to the crucial market in the National Capital Region of Delhi, will require an investment of Rs 1,400 crore in two phases. The first phase (with investment of Rs 800 crore) will be ready by Diwali this year, Balkrishna said.

While, Patanjali may have taken the leap forward to build a sustained base for its product supply in the country, any delay in completion of these capital expenditure plans can hamper Patanjali’s future growth and also impact its liquidity position, ICRA observed.