Patanjali effect: Ruchi Soya surges 12% on distribution deal

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Ruchi Soya Industries shares zoomed more than 12% on Thursday after the company entered into a distribution arrangement with Baba Ramdev’s Patanjali Ayurved. The shares closed at Rs 24.75, up by more than 25% since the previous close. “The company has signed  a memorandum of understanding (MOU) with Yoga Guru Baba Ramdevji promoted Patanjali Ayurved for an exclusive sales and distribution arrangement for the entire range of Patanjali edible oil in large packs,” Ruchi Soya Industries said in a statement on Thursday.

According to the agreed terms, Ruchi Soya has exclusive distribution rights for the existing as well as future range of Patanjali edible oils in large packs. “The MOU will be followed by signing of a detailed service agreement for an initial period of three years, similar to the previous processing and packaging agreements concluded between Ruchi Soya and Patanjali Ayurved earlier this year,” the company’s statement read.

Interestingly, the stock has returned only 17% in the year so far. In the last one month, the shares have gained more than 4%. In contrast, the BSE FMCG Index has shed more than 4% in the same period.

Ruchi Soya Industries is Indiaa’s largest manufacturer of edible oil. The new pact will benefit the company, even as Patanjali Ayurved increases its depth in the Indian markets. “Patanjali will make everything from underwear to ethnic and sportswear soon,” Baba Ramdev  said recently. Recently, the brand said it will launch its line of ‘Swadeshi’ apparel, with an initial sales target of Rs. 5, 000 crore. Patanjali is also reportedly in talks with several investment banks to raise structured credit worth Rs 1,000 crore to fund its expanding interests. Outlining Patanjali’s ambitious plans, Baba Ramdev said an event organized by the All India Management Association, “Patanjali’s revenue will be more than HUL’s (Hindustan Unilever Ltd) in 2018-19. To support this growth, we’ll need to borrow over a period of time,” adding that his dream is to emerge as the “largest packaged goods company in the world by 2020-21.”