Ruchi Soya’s FPO opens tomorrow — price band, GMP and more

• Ruchi Soya Industries is looking to raise ₹4,300 crore through a follow-on public offer (FPO).
• A company usually goes for an FPO when listed entities need funds to grow their business or reduce debt.
• Ruchi Soya, however, is doing it so it could comply with market regulator SEBI’s regulations.

Fast moving consumer goods (FMCG) company Ruchi Soya Industries — a subsidiary of the Patanjali Group — will be tapping the stock market once again on Thursday to raise ₹4,300 crore through a follow-on public offer (FPO).

What is an FPO?

A follow-on public offer, or FPO, is a way of issuing funds for a stock exchange-listed company from its existing shareholders and investors. As the name suggests it follows up onto the initial public offering (IPO), where companies issue its shares to the public for the first time.

A company usually goes for FPO when listed entities need funds to grow their business or reduce debt.

What is the process of launching an FPO?

Just like in the process of an initial public offering (IPO), a company would have to submit a red herring prospectus (RHP) to SEBI for approval. In this document, the company would have to disclose all the details of their business, revenue and other aspects.

When does the issue start?

Ruchi Soya’s FPO will open for subscription on March 24 and will be available for bidding till March 28, 2022.

What is the price band?

Ruchi Soya will offer its shares at a price band of ₹615-650 per share in the FPO.

What is Ruchi Soya’s GMP?

The grey market premium (GMP) — or the premium at which shares are trading in the grey market — of Ruchi Soya’s shares is at ₹28.

Why is Ruchi Soya going for an FPO?

Ruchi Soya is going for an FPO to reduce its promoters’ shareholding in the company and increase the shareholdings of the public, which are currently not in sync with the market regulator Securities and Exchange Board of India’s (SEBI) norms.

Patanjali, the promoter of Ruchi Soya, owns 98.9% shareholdings in the company while public shareholders own 1.1%. However, the minimum requirement for a public shareholding in a listed company should be 25%, as per the market regulator.

Post the FPO, Patanjali’s shareholding in Ruchi Soya would decrease to 81%. Public shareholdings, however, will increase to 19%.

The company will use the proceeds from the FPO to repay its loans, for working capital needs and general corporate purposes.

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