Ruchi Soya has to dilute another 7% by December: CEO Sanjeev Asthana

In a Q&A, he says the 42% surge in the comppany's shares over the FPO puts additional responsibility on it to perform

Shares of Ruchi Soya have surpassed expectations by ending 42 per cent higher over its follow-on offering (FPO) price of Rs 650. CEO Sanjeev Asthana says the strong showing puts additional responsibility on Ruchi Soya to perform. In an interview with Samie Modak, he spoke about various aspects of the business. Edited excerpts:

The listing has surpassed Street expectations. What has changed from the FPO and now?
 

I wouldn’t not like to comment on the stock price. We are just focused on the performance of the company. The market clearly sees a lot of promise in the stock and that should become the main driver of the business . We are pleasantly happy about the way the market has responded. This places additional responsibility on us to keep performing.

How much promoter shareholding has declined to post the FPO?
 

Now little more than 18 per cent is with the public and little less than 82 per cent is with the promoters. Under the minimum public shareholding (MPS) norms, we will have to dilute the remaining 7 per cent by December 2022.

What is the outstanding debt post the FPO?
 

So 100 per cent of the debt will be retired by Monday. The process has begun today itself.

But the object of the issue was to become 80% debt free?
 

We had a board meeting this morning and decided to retire all the debt. We had earmarked Rs 3,300 crore of the FPO proceeds to pare the debt and the remaining was for working capital and general corporate purpose. We choose to finish off the entire debt portion now—all the term loans and working capital loans. That’s permissible under the objects of the issue.

Will Ruchi Soya continue to remain a debt-free company or are there any big capex plans?
 

We have got strong cash flows. That gives us a lot of confidence. While there is no acquisition planned of any significant order but if an opportunity shows up then we have got the capacity.

So is it correct to infer that the balance 7 per cent dilution will be done by the promoters and through not fresh fund raise?
 

That’s too premature right now. We are happy with how things have gone. We will sit down and evaluate all the options before taking a call. Everyone was right now focused only on the FPO.

Will the dependence on edible oil products reduce going ahead in the entire revenue mix?
 

Edible oil is dominant right now. Big focus we have right now is expanding the food business and the ‘Nutrela’ brand and also building the nutraceuticals business. Progressively, the share of edible oil will come down. But it will continue to be a strong part of our revenue portion but as a percentage it will come down as food and nutraceuticals will grow faster.

How is the company impacted by rising raw material prices?

We are very much part of the impact but in a very small way. In edible oil, it is normally a pass through process. The pricing changes every day. So that has not had much of an impact. But the commodity inflation for our food business is there. We are trying to work out a few more efficiencies. There will be some impact but not of significant order.

Is demand also getting impacted?
 

Not yet. We have taken measures so that the entire increase is not passed on to the consumer. Idea is to keep it rational so that the consumer demand doesn’t come down. Our products are not discretionary that the consumers will stop buying them. There is a bit of elasticity of demand. Having said that if there is a one-way spike there will be some impact.

Has the company been able to establish who was behind the SMS controversy?
 

We have filed an FIR (first information report). Now it is for the law to take its course. We have complied with the order of the regulator Sebi. The whole idea was to come across transparent and straightforward.

Ruchi Soya is often compared with Adani Wilmar. How intense is the competition between the two companies?

The combined market share of the two companies is just about 24 per cent. The market is growing at 5-6 per cent every year. There would be something at the ground level but not something that will be a source of concern for either of us. Adani Wilmar is a strong player and we respect them. We have our respective strengths.

Patanjali Ayurved has been able to turnaround the company so quickly after going through the IBC (Insolvency and Bankruptcy Code) process.

The company came through the IBC process in a matter of two years. Then to be able to turn the corner, demonstrate strong performance and then go to the market to raise funds. It is a great success story for the whole IBC process. It is almost like a case study.