Companies

Patanjali will be India’s No 1 FMCG company: Ramdev

Ayushi Kar Mumbai | Updated on July 20, 2021

Hopes to leverage Ruchi Soya portfolio

The Patanjali Group, including Ruchi Soya, is on track to becoming the largest FMCG player in the country this year overtaking Hindustan Unilever, according to Baba Ramdev. The Haridwar-based company crossed the ₹30,000-crore revenue mark in 2020-21 compared to HUL’s revenues of ₹45,311 crore.

“We have already touched ₹30,000-crore turnover this year. With the help of Ruchi Soya, I am confident that we will achieve the goal of becoming the country’s largest FMCG player. The portfolio of products that Ruchi Soya offers itself has a market size of ₹5-lakh crore. If you add to it Patanjali Ayurved’s extensive portfolio, I have no doubt that this goal can be achieved,” Ramdev, founder of Patanjali, told BusinessLine.

Analysts sceptical

However, analysts said the two companies are not strictly comparable as Patanjali sells many low-margin products. “HUL is No 1 in more than 80 per cent of products with best-in-class margins in the segment. Patanjali has been struggling in its core FMCG. It’s doing reasonably well in toothpaste and hair oil. In most other segments, it is performing below the initial market expectation. For the edible oil business, that Ruchi Soya wants to break into, Marico’s Saffola is the only strong brand there. Low-end edible oils are very low margin and not really FMCG,” said Abneesh Roy, Executive Director, Institutional Equities, Edelweiss

Multi-pronged strategy

Explaining plans to scale up revenues, Ramdev said he has undertaken a multi-pronged strategy, including ramping up marketing spend, entering new categories, and positioning Ruchi Soya as the group’s flagship brand for food, FMCG and wellness products.

Patanjali Group aims to make Ruchi Soya debt-free

Patanjali had acquired Ruchi Soya through the insolvency process in 2019 for ₹4,390 crore. Now, with sales of ₹16,318 crore, Ruchi Soya contributed 54 per cent to Patanjali’s total revenue in FY 21. “We have transformed it from a commodity-focussed firm to an FMCG, health, and food company. We have brought in governance, professional management, transparency, and accountability,” said Ramdev.

He wants to launch nutraceutical products under the Ruchi Soya umbrella. “These products will be 100 per cent organic and plant-based with a focus on health and general nutrition. We already have a portfolio of 25 products lined up, for which we have set up manufacturing units and distribution. Ruchi Soya will also be launching a series of soy-based products, as well as extra virgin palm oil, which is more nutritious than its refined counterpart,” he said.

Patanjali Ayurved likely to announce IPO later this year

Stagnating growth

Critics point out that since 2016-17, Patanjali’s growth has stagnated. “Patanjali’s initial years were really good but then it lost its USP as other brands started launching products to counter the homegrown brand. Ramdev and his team will have to grow 50 per cent to match HUL’s revenues. That's a long shot going by the current market sentiments,” said an industry analyst.

Ramdev agrees that Patanjali had hit a saturation point a few years back but insists corrective measures have been taken. “We will focus more on marketing and distribution from now on. We are roping in celebrities as brand ambassadors and are running focussed media campaigns. We are also widening our product portfolio,” he said.

FPO ahead

A listing of Patanjali Ayurved is also on the horizon. For now, though, his immediate focus will be on the upcoming follow-on public offering (FPO) of Ruchi Soya for raising ₹4,300 crore. A part of the proceeds will be used to settle the company’s debt.

Asked if Patanjali and Ruchi Soya will cannibalise each other’s market share, Ramdev said that a non-compete clause has been signed between the two companies. “Therefore, we are legally bound to ensure that Ruchi Soya and Patanjali Ayurved do not produce products that overlap,” he said.

Published on July 19, 2021

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