Ruchi Soya FPO: The stock of Ruchi Soya Industries jumped 8 per cent to Rs 883 on the BSE in Friday’s intra-day trade, extending its Thursday’s 8.5 per cent gain’ after 66.15 million equity shares, which were allotted in a follow-on-public offering (FPO), started trading on the exchanges from today. Ruchi Soya stock opened with a gain of 3.8 per cent at Rs 850 against the previous close of Rs 818.85 on BSE.
However, in the past one week, the stock of the edible oil company has underperformed the market by falling 12 per cent, as against a per cent rise in the benchmark index.
On April 5, 2022, Ruchi Soya had approved the allotment of 66.15 million equity shares for an amount aggregating to Rs 4,300 crore, pursuant to the FPO issue. The company had fixed issue price at Rs 650 per share. Pursuant to the allotment of equity shares in the issue, the paid-up equity share capital of the company stands increased from Rs 59.16 crore to Rs 72.40 crore, the company said.
Objectives for the fresh issue are repayment/prepayment of Rs 2,664 crore of borrowings, funding of incremental working capital requirements of Rs 593 crore and remaining amount will be used for general corporate purposes.
As per the SEBI guidance, the minimum requirement for a public shareholding in a listed company should be 25 per cent, Thus, Ruchi Soya has announced a FPO, as the promoters of the company seek to reduce their shareholding to comply with SEBI’s guidance.
Ruchi Soya FPO: Should You Sell, Hold or Buy?
According to stock market investors, those bidders who applied for arbitrage gains in Ruchi soya FPO, are advised to book profit and exit whereas those who have applied for Ruchi Soya shares keeping long-term time horizon in mind can book 50 per cent profit and hold the remaining investment for 3 month target of Rs 1,000 per share levels keeping trailing stop loss at Rs 740 per share levels.
Speaking on Ruchi Soya FPO listing; Ravi Singhal, Vice Chairman at GCL Securities said, “Those who got Ruchi Soya shares during allotment are advised to book 50 per cent profit and hold the rest for 3 months target of Rs 1,000 apiece levels maintaining strict trailing stop loss at Rs 740 per share levels.” Ravi Singhal of GCL securities went on to add that raw material prices in FMCG segment is soaring and the company has good buffer stock that would give them margin benefit in near term. So, the company is expected to report strong quarterly numbers in short to medium term.
Echoing Ravi Singhal’s views; Santosh Meena, Head of Research at Swastika Investmart Ltd said, “Ruchi Soya share price may see some selling pressure on an immediate basis as it may see unwinding in FPO arbitrage positions therefore investors who applied for arbitrage gain, should book profit while long terms investors can remain invested because multiple positive things are going for the company, shortage of Palm oil and oilseeds will improve the realizations which augur well for the profitability in the short to medium term. Technically, the 700 level should act as an immediate floor for the stock.
Amarjeet S Maurya, AVP – Mid Caps, Angel One Ltd, said: “Incorporated in 1986, Ruchi Soya Industries Ltd (RSIL), a part of Patanjali Group, is one of the leading FMCG brands in the Indian edible oil sector. In terms of valuations, currently RSIL is trading at 34.5x (TTM PE), which is low compared to its peers Adani Wilmar (TTM PE -80.7x). Further, RSIL has strong brand recall, wide distribution, healthy ROE (FY21). Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we are positive on stock.”