REPORT ON PATANJALI FINANCING

BY: Aneesh John

Reg no: 1225116401

MBA 1st year (sec D)

INTRODUCTION:

Patanjali ayurved limited is an Indian FMCG company. Manufacturing units and

headquarters are located in the industrial area of Haridwar while the registered office is
located at Delhi. The company manufactures mineral and herbal products. It also has
manufacturing units in Nepal under the trademark Nepal Gramudhyog and imports majority
of herbs in India from Himalayas of Nepal. According to CLSA and HSBC, Patanjali is the
fastest growing FMCG Company in India. It is valued at US$450 million and some predict
revenues of RS 5,000 crores (US$740 million) for the fiscal 2015–16. Ramdev baba has
stated in his interview said that profit from Patanjali Products goes to charity.

PRODUCT: Foods, beverages, cleaning agents, personal care products & Ayurvedic
medicine.

REVENUE:

Year Revenues (In crore Rs)

2009-10 163

2010-11 317

2011-12 446

2012-13 850

2013-14 1,200

2014-15 2,006

2015-16 5,000

MARKET SHARE: Patanjali’s portfolio spans personal care products, toothpastes, home
cleaning products, dish wash and detergents, staples such as atta, salt and cooking oil and tea,
juices and dairy products, apart from a range of ayurvedic formulations.

With sales of about ₹5,000 crore splintered across as many as 390 products, Patanjali is yet to
grab a large enough share of any category to pose a material threat to the leading player. Even
in toothpastes, the only personal care category where it’s Dant Kanti, a best-seller, is
snapping at the heels of an MNC, Patanjali’s market share is just 5 per cent to Colgate’s 55.

In the food or dairy categories where Patanjali has made significant inroads, there is little
MNC presence. Any aggressive gains by Patanjali in these categories may threaten desi
players such as Emami, Dabur India or Amul far more than the MNCs.
How is patanjali getting its finance?

According to leading domestic brokerage IIFL, Patanjali’s main promoter is Acharya

Balkrishnan, who owns 93 per cent of the company; the remaining stake is owned by Sarwan
and Sunita Poddar, an NRI couple. Yoga teacher and television personality ‘Baba’ Ramdev
does not own any stake in the company, but he has played a huge part in the brand’s gaining
visibility, by marketing it in the numerous yoga camps that he holds across the country.

Initially they provided financial support to the company. There simple strategy is introducing
the product at low cost. To reduce the cost they followed methods like it was able to reduce
its advertisement expenses by 12.20% they mainly concentrated on word of mouth
communication. The company’s umbrella branding strategy helped it gain loyal consumers
among Ramdev’s followers and those with a yen for swadeshi products.

In FY15, Patanjali Ayurved reported a 23 per cent operating profit margin with a 16 per cent
net profit margin. This was fairly comparable with the margins (operating profits at 17-25 per
cent) of the listed FMCG firms. But then, listed FMCG players manage these margins after
spending 12 to 18 per cent of their sales on advertising and promotion

To achieve a target of 10000cr Company by 2019 they are planning for a national presence
will require substantial investment in manufacturing units in southern, western and eastern
India. Word-of-mouth may need to be supplemented by a national advertising campaign.

Acquiring a nationwide distribution presence will require more sophisticated supply chain
and inventory management.

In FY16, the company kicked off a television and print advertising campaign, forged
alliances with big-box retailers like the Future group and entered the e-commerce channel.

How is Baba Ramdev pulling investors?

Ramdev reviles do make huge profits and pay out generous dividends and royalties to their
foreign parents. The board of the company passed a resolution to enhance the cash credit
limit of the company from Rs 150 crore to Rs 300 crore to meet the growing working capital
requirements. Promoter Acharya Balkrishna, who is also the managing director of the
company, agreed to pledge 30 per cent of his holding as security against the enhanced credit
limit, according to documents filed with the RoC.

The company is in talks with banks including State Bank of India, Bank of Baroda, Uco Bank
and a few others as it has embarked on an expansion plan setting up plants across the country.
Individual banks could not be reached for comments immediately. "Long term project loans
with 5-10 years maturity should serve our purposes,"

Patanjali raises the lone from banks not only by showing their CIBIL score, profit and
revenue but also with the help of Ramdev. There is no barrier for patanjali raise loan. With
the help of “make in India” campaign it is going to flourish more heights.
Patanjali Ayurved, which is competing with leading fast-moving consumer goods makers
such as Unilever, Nestle and ITC, plans to raise funds through bank term loans or corporate
bonds as it aims to double its production capacity to 2,000 tonnes a day by the end of 2016-
17. By seeing the operating profit and revenue many banks sanction the loans for patanjali.
Recently ICICI bank sanctioned 1300cr to establish plant in Utterpradesh.

"They may require project financing as they plan to set up food parks in some locations this
year," said MSR Manjunatha, rating analyst at Brickwork Ratings, which has graded the
company with AA. Care Ratings graded the company triple B+, one notch lower than the
current rating. In 2015-16, the company paid about 10% interest on average on its
borrowings.

Now patanjali is arranging finance through bank loans for both short term and long term
financing. It have a good credit rating and repays loan on time this makes patanjali different
from other company. In future to meet the finance they may go for IPO and many investors
are waiting for patanjali to be listed in stock market.

REFERENCE:

1. Wikipedia

2. The hindu business line (published on June 9, 2016)

3. Economics times (published on ET Bureau | Updated: Jun 21, 2016)

4. The hindu (published on Feb. 03, 2016)