The mystery investor who made Rs 1,300 cr from Rs 13 cr in Ruchi Soya

Within a month of Ruchi Soya Industries being relisted on the bourses on January 27, a Delhi-based company — then just six months old — had acquired a 5.94 per cent stake in the FMCG firm for Rs 13 crore after getting an unsecured loan from a zero-income, loss-making consultancy linked to an auto components manufacturer.

Five months later, that investment is worth 100 times more at Rs 1,314 crore.

Indore-based Ruchi Soya, which was acquired by Ramdev’s Patanjali Ayurved in a bankruptcy sale, witn­e­s­s­ed a stellar rally in its stock till recently. After being listed at Rs 17 apiece on the NSE, the stock grew 90 times to Rs 1,535 per share (intra-day) on June 29. Since then, it has hit the lower circuit regularly. On Thursday, the stock closed at Rs 703.85 — still 41 times the listing price.

At Rs 20,822 crore, its market cap of the company is five times its peak valuation of Rs 4,200 crore (November 2010) under the previous management.

With this rally, Ruchi Soya’s shareholders have witnessed a windfall, especially Ashav Advisory LLP.

Incorporated in August 2019 and led by partners and handloom traders Tribeni Agarwal and Ashish Jain, the firm was not capitalised enough to fund the acquisition on its own. It received a Rs 35-crore unsecured loan from one Yojana Management Tech — which is linked to Ashok Minda Group — just 10 days before Ruchi Soya announced the preferential allotment of shares, revealed a deep dive into corporate filings and the ensuing money trail.

As of June 30,  Ruchi Soya was 98.87 per cent owned by the Patanjali group through four entities; only 0.97 per cent was held by public shareholders. The company has not updated the share allotment to Ashav Advisory in its shareholding pattern yet, citing disruptions caused by the Covid-19 pandemic.

 

According to Sebi’s guidelines, all listed firms must maintain at least 25 per cent public shareholding. Analysts said the rise in Ruchi Soya’s stock price was mainly due to its thin free float — shares held by public shareholders. “Ruchi Soya has less than 1 per cent of free float. The lower the number of shares held by members of the public, the higher the volatility in share price movements due to lack of liquidity,” said Abneesh Roy, executive vice-president (research), Edelweiss Securities.

Since Ruchi Soya was acquired as part of a bankruptcy resolution in Sep­t­e­mber 2019, the new promoter was al­lowed to increase its free float to at least 10 per cent in 18 months and then to 25 per cent within three years of relisting.

To reduce the promoter shareholding, within a month of its relisting, Ruchi Soya’s board approved a fresh allotment of shares to a non-promoter entity on February 20. The company informed stock exchanges the funds raised would be used to finance growth and capital needs. This was the first stake sale with Patanjali as promoter.

According to an exchange filing on April 9, the board agreed to issue 18.67 million shares to Ashav Advisory on a preferential basis at mere Rs 7 per share — a massive discount to the market price. Shares of Ruchi Soya on February 20 were trading at Rs 48.7.

The paperwork and a few other formalities regarding this preferential issue were still pending and the company has sought an extension from the exchanges, citing Covid-19. “The formalities will be completed within a reasonable time period after restrictions are lifted in the cities of Mumbai and New Delhi,” the company filing said.

Who is behind the bet?

Ashav Advisory’s filings with the RoC list two partners — Agarwal and Jain. Agarwal is also a director and 50 per cent stakeholder in K R Handloom, registered on the same address as Ashav Advisory. Jain is an authorised representative of K R Handloom.

To fund the acquisition of Ruchi Soya’s share, Ashav Advisory took a loan from Yojana Management Tech, which operates as a management consultancy and has two directors — Amit Jalan and Sunil Goel. Incorporated in 2004, Yojana Management Tech, according to latest available financial statement for 2018-19, had earned zero income in two consecutive financial years and posted losses of Rs 18,321 and Rs 2.86 lakh in 2017-18 and 2018-19, respectively. Also, it had assets worth only Rs 98 lakh as of March 31, 2019.

Since the company had no business operations and negligible assets, it re­ceived an unsecured loan from its promoter entity Minda Capital and further lent the amount to Ashav Advisory.
 

Minda Capital owns 88 per cent in the company, while Whiteline Barter owns the rest on behalf of Minda Capital. Minda Capital is a promoter group company of Ashok Minda Group.

Ashok Minda, promoter and group CEO, his family members and a promoter-owned firm owned a 90.39 per cent stake in Minda Capital, as of March 31, 2019, according to filings. Minda Capital also lists 14 minority shareholders, who hold 10.61 per cent.

And, this list also counts Jain as its shareholder, though he holds only eight shares. The list also shows Pramode and Anita Parasramka hold 0.11 per cent each. The Parasramka family owns the other 50 per cent in Agarwal’s K R Handloom, which had a 2.16 per cent stake in Minda Corporation, the flagship of Ashok Minda Group, until March 31, 2018, before it reduced to 0.74 per cent by March 31, 2019.

Emailed queries to the Patanjali group, Ashav Advisory, and Ashish Jain (designated partner at Ashav Advisory) did not elicit an immediate response. Ashok Minda did not respond to the detailed queries, but the official spokesperson of Minda Corporation responded by saying: “Minda Corporation has nothing to do with this transaction.”