Edible oil firm Patanjali Foods will acquire all non-food businesses of Patanjali Ayurved, including toothpaste, agarbattis, soaps and other items with strong brand recognition from Patanjali Ayurved.
Patanjali Foods was initially founded as Ruchi Soya Industries Ltd in 1986 and operates across edible oils, FMCG products and wind power generation markets through an array of brands like Patanjali, Ruchi Gold and Nutrela.
Brands
Baba Ramdev’s Patanjali products have experienced a dramatic decrease in sales after initially experiencing great success. Revenues for the company have experienced double-digit decline over recent months as raw material costs increase; Acharya Balkrishna, CEO of Patanjali has blamed this on their inadequate supply chain management practices.
The company enjoys an expansive presence both domestically and abroad, selling dairy, yoghurt, tea, wheat flour and other food items; additionally it also has an assortment of personal care products in its product portfolio.
Apart from these acquisitions, it has also acquired two major companies at prices much lower than their market values; each transaction being subjected to independent valuation exercises performed by independent valuers and is expected to lead to multiple key synergies including brand enhancement, cost optimisation and operational efficiencies.
Revenue
Patanjali Foods‘ revenue has been on an upswing as it broadens its product offering, increases reach, and diversifies distribution channels. Masala business growth is especially impressive. Furthermore, new products have been released while an emphasis is being put on premiumisation of existing offerings.
In its FY23 annual report, the company noted its efforts in streamlining operations by automating processes and improving information flow – an approach which helped it meet KPIs while increasing efficiency.
Oil Palm Plantation project of the company is making good strides, with cultivation area increasing and employee numbers expanding steadily. Unfortunately, high commodity prices caused difficulties for edible oils and other businesses owned by this company.
Additionally, they have experienced higher input costs such as urea and diesel that have caused their net profit to decrease. The company expects its financials to improve over time as they strive to reduce debt; already they have started paying back loans used to purchase the business of Divya Pharmacy.
EBITDA
Patanjali Foods uses EBITDA (earnings before interest, taxes, depreciation and amortization) as a measure of its profitability. This metric removes any impact from financing and accounting policies on net income; EBIT divided by total revenue is its formula.
Patanjali is one of India’s premier FMCG players, boasting brands such as Patanjali, Ruchi Gold, and Nutrela in its product portfolio. Additionally, it operates India’s largest oil palm plantation and works alongside farmers to promote sustainable cultivation practices.
In FY23, FMCG contributed around 32% to revenue despite high volatility in edible oils and commodity prices. Performance for this segment should improve over the coming quarters as cost optimization and margin expansion have enabled sustained profitability; these efforts position them for strong growth over the coming years. Recently completed follow-on public offer raised massive Rs 4,300 crore which will go toward strengthening distribution networks further.
Financials
The company’s strategy was clear: draw upon Indian nationalism to sell products espousing traditional Ayurveda. From biscuits, ghee, or toothpaste – whatever it was – to drum up Swadeshi support while selling at prices appealing to India’s masses.
Business model not without controversy: the company faced allegations of false advertising after ads claimed its ayurvedic products could help treat chronic conditions like high blood pressure. Defiance to an order from the Supreme Court meant they continued running their ads despite an order against doing so from court.
Recent news shows Kishore Biyani, India’s equivalent of Sam Walton, was delighted by what he found: neat production lines packaging an expansive selection of FMCGs. Since then, the company rebranded as Patanjali Foods and boasts that they won’t be affected by Supreme Court’s verdict against them; indeed they plan on increasing ad spending for edible oils, biscuits and ghee products.
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