Baba Ramdev-led Patanjali Ayurved has completed the acquisition of debt-ridden edible oil firm Ruchi Soya through a bankruptcy process in the Rs 4,350-crore resolution plan.
Patanjali has completed the process of transfer of equity and debt portions to lenders.
For completing this acquisition, Patanjali has tied up with five banks – State Bank of India (SBI), Union Bank of India (UBI), Punjab National Bank (PNB) and Allahabad Bank.
It has secured loans of around Rs 3,200 crore from the consortium of lenders.
Interestingly, PNB and SBI were the top lenders to Ruchi Soya.
Other lenders of debt-ridden edible oil firm are Central Bank of India, Corporation Bank, ICICI Bank, IDBI Bank and Bank of India.
The lender consortium will recover Rs 9,384 crore from Ruchi, while secured financial creditors would get Rs 4,053.19 crore.
Under the resolution plan, workmen and employees were to be paid Rs 14.92 crore while unsecured financial creditors were to receive Rs 40 crore.
Ruchi Soya went into insolvency in December 2017.
Following this, the insolvency plea filed by two lead creditors — Standard Chartered Bank and DBS Bank — was admitted by the NCLT.
Lenders remain sceptical about funding Patanjali’s acquisition plan given the numerous downgradings of Ramdev led company by credit rating agencies.
SBI and others collectively extended a credit line of Rs 4,000 crore to enable Ruchi Soya acquisition.
In October and November, at least three rating agencies, including ICRA and CARE, have downgraded ratings for bank loan facilities of Patanjali.
In April this year, Ruchi Soya’s committee of creditors led by the SBI had agreed to a resolution plan submitted by Patanjali.
Net net we believe that Ruchi Soya has been a wealth destructor for investors and banks and this new proposal by Patanjali Group is unlikely to change the broad picture for investors
For banks who ate funding this new deal, it looks to be forced decision as without there financial support Ruchi Soya would have been bankrupt long time back and the only way to save it was to infuse fresh money
But retail investors have a choice and hence they are under no duress to buy into such a weak business. For banks, it is a risky gamble as the new promoter is now Patanjali who is hoping to use the new facilities to ramp it’s business and cut its costs.
While Ruchi Soya has done good brands the problem with it was its huge debt which resulted in a big loss to shareholders. Hence, in conclusion, it would be wise to stay away from such heavy leveraged companies that have been wealth destructors in the past.
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