The FMCG industry witnessed a noteworthy strategic move on Friday, with Patanjali Foods Ltd, known primarily for its edible oils, announcing a potential acquisition of the non-food business from promoter group Patanjali Ayurved, famously steered by Baba Ramdev. This significant venture could reshape the landscape of Patanjali’s business operations, although specific categories included in the acquisition were not detailed within the company’s initial disclosure.
Market insiders have hinted that Patanjali Foods might target categories encompassing dental, home, and personal care products, all of which are integral to Patanjali Ayurved’s revenue stream, contributing to approximately half of the promoter’s turnover. Such a move would not only diversify Patanjali Foods’ business but also integrate a variety of popular brands under its umbrella.
In its regulatory disclosure to the stock exchange, Patanjali Foods detailed the board’s initial discussions regarding the proposal received from Patanjali Ayurved Ltd. The proposal pertains to the sale of Patanjali Ayurved’s non-food business segment to Patanjali Foods. According to the announcement, the board has granted preliminary approval to assess the optimal approach for enhancing synergy with Patanjali Ayurved’s non-food portfolio in a mutually beneficial and transparent manner.
Senior executives of the company have been tasked with executing the due diligence process, engaging experts, and negotiating the terms of the proposal. These officials will report back to not only the Audit Committee but also the board for further deliberation on the findings and advancements.
This prospective acquisition aligns with Patanjali Foods’ history of strategic expansion. In recent years, the company has successfully integrated other business segments of Patanjali Ayurved into its fold. Notable acquisitions include purchasing Patanjali’s biscuits business for Rs 60.03 crore in May 2021, as well as assimilating the noodles and breakfast cereals division for a sum of Rs 3.50 crore in June 2021, followed by the acquisition of the broader food business in May 2022 for a healthy Rs 690 crore.
Patanjali Foods believes this latest proposal from Patanjali Ayurved could lead to fruitful synergies, strengthening its product range with renowned brands and potentially bolstering revenue growth alongside earnings before interest, taxes, depreciation, and amortization (EBITDA).
The roots of Patanjali Foods, originally dubbed Ruchi Soya Industries Ltd, trace back to 1986. Since its inception, the company has soared to become a front-runner in the FMCG sector. Operating through an extensive portfolio of brands such as Patanjali, Ruchi Gold, and Nutrela, the company’s domain spans not only edible oils and a spectrum of FMCG products but also wind power generation.
Sources close to the industry suggest that Patanjali Foods is considering the integration of leading brands from Patanjali Ayurved, such as Dant Kanti for dental care and Kesh Kanti for haircare. These segments signify a substantial portion—approximately 50-60%—of the total turnover of Patanjali Ayurved, indicating the strategic importance of the acquisition to both entities.
In the fiscal year ending 2023, Patanjali Foods reported a considerable uptick in total income, amassing Rs 31,821.45 crore as opposed to the previous year’s Rs 24,284.38 crore—a clear indicator of the company’s thriving operations and potential headway for future growth with the proposed expansion into non-food businesses.
