After Adani Wilmar’s withdrawal, Patanjali is making one more last-ditch attempt to acquire bankrupt Ruchi Soya and take the number 2 rank in the lucrative edible oils market.
Adani Wilmar, the successful bidder for India’s largest bankrupt edible oil company Ruchi Soya, has withdrawn its Rs 5,474 crore offer for acquiring the company, expressing frustration over the delays in the resolution process. According to Adani, these delays are deteriorating the asset value of Ruchi Soya and are detrimental for stakeholder interests. Adani Wilmar had won the bid in August when it was voted by the committee of creditors.
Meanwhile, Swami Ramdev’s Patanjali Ayurved, which submitted the second highest bid, is keen to step in and acquire the company. In its letter to resolution professional Shailendra Ajmera and Ruchi Soya lenders, Patanjali Ayurved has offered to match Adani’s bid if it is permitted to do so. Adani Wilmar, a joint venture between infrastructure major Adani Group and Singapore’s Wilmar International, had been voted by the committee of creditors (CoC) as the winning bidder for India’s largest bankrupt edible oil maker in August.
The bankrupt Ruchi Soya currently faces a debt burden of Rs 9,405 crore along with Rs 1,248 crore that’s due to operational creditors. Around Rs 4,300 crore from Adani Wilmar’s offer was to be given to lenders. Patanjali’sbid of Rs 5,765 crore was higher, but the amount offered to lenders was lower at Rs 4,065 crore. The case has similarities with Metalyst Forgings, Amtek Ring Gears Ltd and Orchid Pharma, where companies have won bids but then gone back on their proposals.
Ruchi Soya was ranked at 175 among the top 250 consumer product companies in the “Global Powers of the Consumer Products Industry 2012″ report by Deloitte. It was hit by multiple problems including unfavorable duty structures for its main edible oil refining business and two successive poor monsoons that impacted seed extraction. It entered into many short-term borrowings to manage the situation but only ended up getting crippled by debt.
For Patanjali on the other hand, Ruchi Soya is a valued asset due to the fast-growing market for packaged edible oils. It garners 40% share of consumption and is projected to grow at a CAGR of 6-8% over the next five years. Adani is the market leader with a 19% share in edible oils followed by Ruchi Soya at 14%. By acquiring Ruchi Soya, Patanjali could leapfrog to number 2. Adani would have dominated the market with the acquisition, but it may have felt that the delays in the resolution coupled with the stress of turning around a troubled asset were too much to handle.