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Ruchi Soya Industries Limited

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FPO Report
24th Mar’ 22
Snapshot Price Band (Rs./Share) 615-650
Opening date of the issue 24th Mar 2022
Company is a diversified FMCG and FMHG focused company, Closing Date of the issue 28th Mar 2022
with strategically located manufacturing facilities and well No of shares pre issue 29,58,41,007 Eq Shares
recognised brands having pan India presence. Company is one
Issue size Rs 4300 Cr
of the largest FMCG companies in the Indian edible oil sector
and one of the largest fully integrated edible oil refining Face Value (Rs/ share) 2
companies in India. Bid Lot 21
BIDDING DETAILS
VALUATION
QIBs (Including Anchor) 50% of the offer (Approx
Company is bringing the issue at price band of Rs 615-650 per 33071000 Eq Shares)
share at p/e multiple of 28x on pre issue FY21 eps basis. 15% of the offer ( Approx
Company with upstream and downstream integration is one of Non-Institutional
9921,000 Eq Shares)
the key players in oil palm plantation & have developed an
effective strategy to procure the key raw materials required for Retail 35 % of the offer ( Approx
business.Also company’s products enjoy strong brand 23150,000 Eq Shares)
recognition in the Indian market & benefit from a strong, ICICI Securities Ltd, SBI Capital
established and extensive distribution network. .Company has Lead managers
Markets, Axis capital Ltd
foray into health and wellness space with launch of
Nutraceuticals & is Pioneer and market leader in branded TSP Registrar to the issue Link Intime India Pvt. Ltd.
space . Hence we recommend “Subscribe” on issue .

WHAT WE LIKE

Company’s products enjoy strong brand recognition in the Indian market

There has been an increased preference for branded food products among retail consumers in India. This shift is a result of a number
of different factors, such as an increase in awareness of health and hygiene- related matters, growth of the organized retail distribution
network and the rise in purchasing power among consumers, including in rural areas. Company have a strong portfolio of brands
focused on various types of edible oils and soya foods. Company’s brand ‘Nutrela’ is synonymous with TSP and is a household and
generic name. Company’s nutraceuticals brand Patanjali – Nutrela is focused on health and wellness and reaps the benefits of the
association with a proven brand like, Patanjali. Company’s robust brands portfolio comprises of Nutrela, Mahakosh, Ruchi Gold,
Ruchi Star, Sunrich, Soyumm and other brands, which are well positioned in the market. Company’s brand, Ruchi Gold has market
leadership position on account of being India’s highest selling palm oil brand. Company have been particularly successful in marketing
its Nutrela brand, as a brand focused on the health and wellness segment.
Strong, established and extensive distribution network
The products of company are sold through a pan India network of over 97 sale depots, 4,763 distributors who in turn reach out, directly
to 4,57,788 retail outlets (general trade channel) in the urban, semi-urban and rural areas of the country in addition to company’s
increasing focus on modern trade and e-commerce platforms like Big Basket. Company’s edible oil and soya products are also retailed
through Wal-Mart India Private Limited, More Retail Private Limited and Spencer’s Retail Limited. Company’s products are also
exported to over 30 countries, as on September 30, 2021, across the world, which reflects the popularity of company’s brands across
the globe.
Pioneer and market leader in branded TSP space
Company, pioneered soya chunks and Nutrela soya chunks is the market leader with a share of 40% in branded soya chunks. From
introduction of this category in late 1980s, company established its brand Nutrela by becoming a household name for soy chunks. Till
date, Nutrela is used as a generic name for textured soy protein (TSP) in India. Soya chunks are said to have 52% protein, much higher
than eggs and milk which range from 10-15% and are a great source of protein especially for vegetarians. Soya chunks are a highly
profitable line of business for edible oil players, owing to the upstream integration.

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Ruchi Soya Industries Limited

COMPANY BACKGROUND

Being the pioneers and largest manufacturers of soya foods has aided company’s brand ‘Nutrela’ in becoming a household and generic
name in India. Company is across the entire value chain in palm and soya segment, with a healthy mix of upstream and downstream
business. Company have been allocated zones, to undertake palm plantation, by the Government, which assists company in backward
integration of sourcing palm oil. Ruchi Soya is the largest player in terms of allocated zones. Company’s integration also extends
downstream to the oleochemicals and other by-product and derivatives business. Company is pioneers in soya chunks which are
associated with nutrition and good health. Leveraging upon the brand ‘Nutrela’, company have launched a range of premium edible oils
and blended edible oils and ‘Nutrela High Protein Chakki Atta’ and ‘Nutrela Honey’ in Fiscal 2021. Further company have expanded
its packaged food portfolio by acquiring the ‘Patanjali’ product portfolio of biscuits, cookies, rusks, noodles, and breakfast cereals. In
Fiscal 2022, company forayed into a niche and a high growth FMHG segment with the launch of its Nutraceutical business. Company
is also into the wind power generation business, where the renewable power generated is used for sale and for captive use. This also
helps company to offset its carbon footprint, to the extent possible. Company is a part of the Patanjali group, one of India’s leading
FMCG and health and wellness company. Their portfolio includes health and ayurvedic products, cosmetics, processed food, beverages
and juices, and personal and home care products. Company leverage Patanjali’s expertise and technical know-how in nutraceuticals and
benefit from the synergy in the research and development and the pan India distribution network.

As on date, for edible oil and its derivatives business, Soya flour, TSP, and biscuits, company have a total of 23 processing plants (of
which 17 are currently operational) across India, out of which 10 such processing plants form company’s oil crushing and refinery units,
with an aggregate yearly oilseed crushing capacity of 3.71 MMT and an aggregate yearly oil refining capacity of 3.92 MMT and 1
biscuit manufacturing plant with yearly processing capacity of 27,900 MT. Majority of the plants are located with access to National
Highways, railway rakes and ports, while company’s refining plants are located at ports providing easier access to imported edible oil,
and its crushing units are located around seed production belts.

The following table sets out the (a) production volume of company’s primary products and (b) sales turnover of its primary products
(which includes turnover in relation to both production and trading activities in relation to these products and in relation to by- products
of these products) for the periods indicated:

Particulars FY Ended Mar’20 FY Ended Mar’21 Six months ended Sept’21

Prod Vol Sales Turnover Prod Vol Sales Turnover Prod Vol Sales Turnover
(in MT) (in Rs Lakhs) (in MT) (in Rs Lakhs) (in MT) (in Rs Lakhs)
Vegetable Oil
Vegetable oils 1,89,004.36 20937.09 1,84,012.66 13589.58 88,557.29 26,467.88
Crude
Vegetable oils 13,04,482.88 10,15,846.37 13,74,826.85 13,21,700.47 5,92,508.47 863,173.55
Refined
Vanaspati and
bakery fats
Vanaspati and 1,08,477.53 69,200.45 1,02,308.21 83,804.32 51,179,.00 57,806.78
bakery fats
By-products
and derivative
Textured Soya 62,056,.18 45,404.96 49,670.79 42,122.34 18,672.33 23,704.07
Protein
Oilseed meal 4,59,647.37 99,668.20 4,58,105.59 95,237.87 121,951.48 35,168.64
Edible soya 66,578.49 8,664.05 45,038.22 6,491.24 16,347.19 3,552.12
flour
Others 2,32,768.35 42,862.33 2,36,353,26 49,705.48 1,21,915.17 99,927.93
Total 24,23,015.16 1,302,583.45 24,50,315.59 16,12,651.31 10,11,130.92 11,09,800.97

Source:RHP

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INVESTMENT RATIONALE
Upstream and downstream integration and one of the
key players in Oil Palm Plantation
Company have developed an effective strategy to
procure the key raw materials required for its business
and have a track record of managing volatility in the
commodity prices and foreign exchange markets
Presence across mass, value and premium segment
Hem Securities Research
Ruchi Soya Industries Limited
The edible oil industry in India is fragmented wherein 13% of oil is sold
as loose/unbranded and the consumers are shifting to branded oils,
which presents a large market for its products. Company is one of the
few companies in this industry operating across the value chain, which
includes sourcing, supply chain, manufacturing, branding and
distribution. This enables company to manage costs more effectively
than several of its competitors and also helps in scalability of
company’s edible oil business. It also gives company the flexibility to
alter its mix of products in line with any changes in the demand for its
products or in the availability or the price of company’s key raw
materials at any given time. Over the years, company has developed
relationships with some of the large oil suppliers in the world.
Company’s supply chain is further bolstered, with the palm plantation
business which works with farmers in a total aggregate area of 2,99,245
hectares of which 56,106 hectares is under cultivation across nine
states, in certain specified areas, in return for providing them certain
technical and other assistance in relation to palm oil cultivation.
Over time, company have developed the capability of effectively
managing several of risks, including by the adoption of active and
effective hedging strategies. This helps to maintain the stability of
company’s margins more effectively than several of its competitors. In
relation to palm oil refining business, company rely primarily on
purchasing crude palm oil from a number of different international
suppliers. Company have implemented certain initiatives which will
help to gradually increase company’s access to FFBs directly from oil
palm plantations within India going forward and thereby reduce its
dependence on suppliers of crude palm oil. In relation to soybean and
mustard oil product business, company primarily rely on purchasing
soybean seeds and mustard seeds directly from agents and auction
centres in India. Company have been able to build strong relationships
with these farmers and agents through a number of measures including
making timely payments to them.
Company’s diversified product portfolio enables to cater to a wide
range of tastes, preferences, price points and consumer segments.
Company have products in the premium as well as mass market
categories, which makes its products less susceptible to shifts in
consumer preferences, market trends and risks of operating in a
particular product category. Company’s ‘Nutrela’ brand is positioned
as a premium brand focused on the health and wellness platform. Its
‘Mahakosh’ brand is focused on the middle-income segment and its
‘Ruchi Gold’ brand is focused as a “mass” brand focused on the middle
and lower-income segments. As on March 31, 2021, company’s
diversified product portfolio for its edible oil segment consists of 233
SKUs. Company will continue to expand its product portfolio within
the existing product segments, focus on increasing sales realisation and
volumes, and strive to provide differentiated offerings to its consumers.
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Ruchi Soya Industries Limited

OBJECTS OF ISSUE
The net proceeds of the Issue, i.e. Gross proceeds of the Issue less the Issue expenses (“Net Proceeds”) are proposed to be utilised in
the following manner:
1. Repayment and/ or prepayment of borrowings from consortium of lenders and PAL, one of company’s Promoters, in full or part,
availed by company;
2. Funding incremental working capital requirements of company; and
3. General corporate purposes.

RISKS

Certain of company’s Promoters had pledged their Equity Shares and entered into an unattested share pledge agreement in favour of a
common security trustee appointed by the consortium of lenders, which have been released temporarily to permit lock-in in terms of
SEBI ICDR Regulations. Any exercise of such pledge by any lender forming part of such consortium or enforcement of such pledge
could dilute the shareholding of the Promoters, which may adversely affect company’s business and future prospects.
Source:RHP

INDUSTRY OVERVIEW
Overview of Packaged Edible Oil Market in India
Edible Oil Availability in India (Volume)
Edible oils are indispensable to Indian cooking. Growing population, changing tastes and preferences of consumers, shifting
consumption pattern towards branded oils and consistent marketing and distribution initiatives by leading edible oil brands is
leading to rising consumption of edible oils in the country.
Edible Oil Consumption in India (Volume) The total consumption of edible oil in Indian in FY 2020 has been estimated to be
22 Mn MT. Out of the total requirement, it is estimated that ~10 Mn MT is produced domestically from primary (Soybean,
Rapeseed& Mustard, Groundnut, Sunflower, Safflower & Niger) and secondary sources (Oil palm, Coconut, Rice Bran, Cotton
seeds & Tree Borne Oilseeds) and remaining 60%, is met through import. Approximately 18% of this volume is consumed by
food processing enterprises such as such as savoury snacks and bakery good manufacturers who buy in bulk (loose form in
tankers). Almost 20% of this volume is consumed by or the HoReCa (Hotels, Restaurants and Caterers) segment and 62% of
the volume is consumed by the end consumer segment. The end consumer segment and HoReCa segment comprises of
packaged oils with pack sizes ranging from 200 ml to 15. While the smaller packs are purchased by the end consumer, the
larger pack sizes are preferred by the HoReCa segment. The consumption volume is projected to be ~25 Mn MT by FY 2026.
Edible Oil Retail Market in India The edible oil retail market is estimated to be ~INR 1,79,500Cr in FY 2020 and is expected
to grow at a CAGR of 6% in the coming 5 years. It has been growing steadily at a CAGR of 6% in the last five years. The
share of unbranded play is consistently dropping and is estimated to shrink to ~ 10% by FY 2025.

Branded Edible Oil Retail Market in India The branded edible oil market is estimated to be around INR 1,56,000 crore and is
expected to grow faster than the overall category gaining a lion’s share of close to 90% of the total market in terms of value in
the coming five years. It is estimated that close to 75% of the total edible oils available in terms of volume is retailed as a
branded product. The edible oil industry in India is fragmented wherein 13% of oil is sold as loose/unbranded and the
consumers are shifting to branded oils, which bodes well for the organized players.

In the northern region, soybean oil is preferred along with mustard oil. Soybean oil is widely consumed in central India followed
by sunflower oil. Cottonseed, sunflower and groundnut oil are preferred in the western states. In the eastern states, mustard
and soybean oil are preferred followed by sunflower oil. In the southern states, sunflower and palm oil are the most widely
consumed edible oil. Palm oil widely used in the coastal belt. Consumption in rural India constitutes almost 50% of the total
consumption in this category by volume and is growing at a faster rate than the urban. The favourable growth of economy has
resulted in a high growth in consumption of packaged staples in the rural parts of India. For most national players, the growth
in Tier II and III cities has been higher than that in the metros. Value Segmentation Most edible oils players have created
brands across premium and popular value segments. The width of the portfolio lends access to various socio-economic classes
without disturbing the positioning of other brands and flexibility to introduce product variants accordingly. The share of sales
from premium and popular segments may vary for each player. While palm oil and blends thereof are largely positioned as
popular varieties, given its application for industries, soybean, mustard and sunflower can be positioned across the two
segments.

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Ruchi Soya Industries Limited

(Rs in Mn)
Financials As at Sept 30,2021 FY21 FY20 FY19
Total Revenue (A)
112611.91 163186.33 131177.88 127292.33
Total Expenditure (B)
106004.5 153646.1 127168.93 126073
EBIDTA
6607.44 9540.26 4008.95 1219.33
EBIDTA Margin
5.87 5.85 3.06 0.96
Other Income
457.96 643.44 575.78 1000.23
Depreciation
663.81 1332.51 1357.74 1382.44
EBIT
6401.58 8851.19 3226.99 837.11
Interest
1810.73 3707.19 1123.15 69.91
PBIT
4590.85 5144.00 2103.84 767.20
E/O Items
0.00 0.00 74902.30 -425.91
PBT
4590.85 5144.00 77006.14 341.29
Tax
1212.80 -1663.72 -140.00 0.00
PAT
3378.05 6807.72 77146.14 341.29
NPM
3.00 4.17 58.81 0.27
ROE % 7.67 16.76 228.86 -0.75
EPS 11.42 23.02 260.84 1.05
Eq Cap
591.53 591.53 591.53 652.94
Net Worth 44015.39 40624.13 33709.02 -45207.92

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Ruchi Soya Industries Limited

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