EV, steel makers seeking JV, buyout deals, says Patanjali
BUSINESS PLAN Firm yet to decide on diversification, but will do what is in sync with its biz, says MD NEWDELHI:
Patanjali Ayurved Ltd, the packaged goods company founded by yoga-guru-turnedbusinessman Baba Ramdev, has been approached by electric vehicles (EVs), steel and mobile chip manufacturers for support, managing director (MD) Acharya Balkrishna told Mint.
Whilesomeofthesecompanies are exploring a buyout, some are seeking joint venture (JV) partnerships and financial aid to run their businesses. Balkrishna declined to name the companies, and said Patanjali is yet to take any decision on possible diversifications.
Patanjali will invest in or partner with only home-grown companies.
“Manufacturers from almost all sectors, including steel, electric vehicle, anti-radiation mobile chip, have approached us. But we can’t do everything. We’ll only do whatever is in sync with our business, and anything that the people of the country need,” Balkrishna said, adding that the Haridwar-based firm will continue to strengthen its ‘swadeshi’ movement and support companies with similar agenda.
This follows Patanjali’s diversification plans into solar power equipment manufacturing by acquiring Advance Navigation and Solar Technologies Pvt. Ltd, Mint reported on December 4, 2017.
The promotion of EVs is a strategic goal for India’s National Democratic Alliance (NDA) govin ernment, which is keen to cut the country’s oil imports. Also, of ₹1,28,810 crore as total underlying default under the Insolvency and Bankruptcy Code (IBC), the steel sector accounted for around half (44.25%) or ₹57,001 crore, according to the Economic Survey released earlier this year. Of the 12 firm Reserve Bank of India (RBI) has asked banks to start bankruptcy proceedings against, four are steel firms.
Patanjali Ayurved may emerge as a white knight riding to the rescue of infrastructure companies weighed down by stressed assets, Mint reported on 17 July 2017.
“If we say we are entering an industry, others get scared. At times, people spread words (that we are entering a sector) as well,” said the Patanjali MD who owns 98.5% in the company.
This comes at a time when Patanjali’s growth rate has stalled with the company closing “the year around the same level of the previous fiscal year’s revenue,” said Balkrishna, despite its target of doubling sales that was impacted by lingering effects of demonetization and implementation of goods and services tax (GST). It had reported revenue at ₹10,561 crore in the fiscal year ended March 31, 2017.
Analysts called for caution given the differences between B2B and B2C business dynamics and capabilities. “Its quite evident that Patanjali is looking at becoming a classical multi-industry ‘business house’ set up, much like Reliance Industries or Aditya Birla Group. It hopes to leverage its strong brand reputation and access to capital, to venture into businesses which are seemingly unrelated to its FMCG set-up, but present profitable opportunities on their own. While there are enough success stories like these India and globally, it should be cautious about the pace at which it opens new unrelated flanks and also be clear about its core strengths and corporate set-up. B2B business dynamics and capabilities are quite different from the B2C set up that it has been successful at so far,” said Abhishek Poddar, a partner at consulting firm AT Kearney Ltd.
Interestingly, Patanjali is also in the race for acquiring edible oil maker Ruchi Soya Industries Ltd which has filed for bankruptcy. Patanjali has made a bid of ₹4,000-4,500 crore for Ruchi Soya, Mint reported on May 7.
Declining to reveal the bid amount, Balkrishna said Patanjali’s interest in Ruchi Soya is because of its infrastructure that Patanjali can use to ramp up production. The company has already tied up with banks for financing the deal.
Besides its main business of packaged consumer goods, Patanjali has a presence in retail, education and healthcare (Ayurveda). The company sells everything from shampoo and toothpaste to biscuits, noodles, rice and wheat.
Patanjali has invested in home-grown stressed companies before. In October 2016, it had bought a rice mill owned by RH Agro Overseas (P) Ltd in Sonipat for ₹70 crore. Interestingly, its first acquisition was not a homegrown company. It had, in 2011, acquired California-based herbal firm Naturomic Llc which was rechristened Herboved Inc., and made a subsidiary of Patanjali Ayurved.