FMCG stock falls 5% after exchanges freeze promoter shares; Check the details

The shares of Patanjali Foods Ltd. (Ruchi Soya Industries Ltd.) got locked in the lower circuit after falling 5% during the early hours of trading on Thursday. This comes on the back of the company notifying that the stock exchanges froze the promoters’ shares as they hold a majority 80.82% stake in the company. 

In 2019, the Baba Ramdev-backed Patanjali Ayurved purchased Ruchi Soya during the insolvency resolution. Post the CIRP process, the promoter holding jumped to 99%. In such scenarios, SEBI allows a maximum of 3 years to increase the public shareholding to a minimum of 25%. 

However, the promoters failed to decrease their holding in the company even after the 66.2 million shares FPO in March 2022. Market experts opined that the exchanges shall lift the curb once the promoters chart a detailed plan to reduce their holding in the company to a maximum permissible limit of 75%. 

On the development, the management commented that the step taken by the exchanges would not have any detrimental effects on the company’s financial position. Furthermore, they are confident of achieving the minimum public shareholding norms in the next few months. 

The statement filed with the exchanges by Patanjali Foods read,” The company had to increase its public shareholding from 19.18 percent to 25 percent and while management of the company was discussing various means and methods for improving its public shareholding, in the meantime, the company received an email from the stock exchanges freezing the shareholding of the promoters and promoter group.” 

Overall, 292.58 million shares of the 21 entities of the promoter group have been frozen by the Bombay Stock Exchange and National Stock Exchange for not following shareholding compliance. 

Patanjali Foods stated in the filing, “The company came up with Further Public Offering (FPO) in the month of March 2022 and issued 6,61,53,846 equity shares of Rs. 2/- each at a premium of Rs. 648/- per share aggregating to Rs. 4,300 Crores by which the public shareholding was increased to 19.18%.” 

It further said, “Accordingly, the company had to increase its public shareholding from 19.18 % to 25% and while management of the company was discussing various means and methods for increasing its public shareholding, in the meantime, the company received an email from the stock exchanges freezing the shareholding of the Promoters and Promoter Group.”

Founded in 1986, Patanjali Foods Ltd. a mid-cap company with a market capitalization of Rs 33,484 Crores, is engaged in the business of edible oil, cooking flour, soy chunks, and more such kitchen staples. It has 22 production facilities and is valued at Rs 33,500 crore. 

Written by Vikalp Mishra

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