The Ruchi Soya stock has grown by 8,400% in 104 days – while investors rejoice, analysts want a SEBI probe

• Picked up by Patanjali Ayurved during insolvency proceedings in December 2019, the Ruchi Soya stock has rocketed to ₹1,431 from just ₹16.9 on January 27 when it was relisted.
  
• The massive surge in its share price might have made its investors happy, but analysts are sounding the alarms and seeking a probe by the Securities Exchange Board of India (SEBI).
  
• In the 104 trading sessions since relisting, Ruchi Soya’s market capitalisation has grown from ₹500 crore to ₹42,700 crore.
  

The Ruchi Soya stock is a tale of multibaggers that will be told for years to come. Investors who haven’t been able to buy the stock are regretting, while the lucky ones rejoice. Analysts, however, want a probe into the stock by the Securities Exchange Board of India (SEBI).

Ruchi Soya is a tale of springing back to life after nearly dying. One of the largest manufacturers of edible oil, Ruchi Soya went bankrupt last year, only to be picked up by Patanjali Ayurved during insolvency proceedings in December 2019.

The restructuring that followed helped Ruchi Soya shed over ₹9,300 crore of debt. The company’s stock was relisted on January 27, after which it surged by 8,400% in 104 trading sessions, going from ₹16.9 to ₹1,431.




Why did the Ruchi Soya stock grow by 8,400%?

So what’s behind this massive rally in the company’s stock price? A hope of a turnaround?

99.03% (nearly 29 crore shares) of Ruchi Soya’s shares are held by fifteen Patanjali group companies, leaving 0.97% (28 lakh shares) to the public. Out of these, only 10,000-15,000 shares are traded daily on an average, making it difficult for retail investors to buy in.

This has sent the stock price rocketing from just ₹16.9 to ₹1,431 as of June 29, resulting in a growth of over 84 times.

One of the factors contributing to the seemingly never-ending rally in the Ruchi Soya stock is the scarce supply of shares, and people clamouring to buy whatever shares they can get their hands on. This cycle has been running almost non-stop for over 100 days now.

“Low free float is the primary reason for the surge in the shares of Ruchi Soya. Sebi should do some investigation and try to identify who are the buyers and why are they acquiring these shares,” independent market analyst Ambareesh Baliga told Economic Times.

Another analyst too called for an investigation by SEBI.

“SEBI should investigate why promoters are holding 99% stake even after five months of relisting,” Arun Kejriwal, director at Mumbai-based investment advisory firm Kris, told ET about the demand-supply situation that is driving up the share price of Ruchi Soya.

Reverse merger of Patanjali on the cards?

Another factor that has fuelled this demand for the company’s shares is the hopes of a reverse merger of Patanjali Ayurved with Ruchi Soya, which would give shareholders an early entry into the emerging fast-moving consumer goods (FMCG) player.

The insolvency resolution plan put forward by the Patanjali group included the reverse merger of Patanjali Consortium Adhigrahan with Ruchi Soya.

The Baba Ramdev-led Patanjali group is targeting a turnover of over ₹40,000 crore next year, and ₹50,000 to ₹1 lakh crore in the next five years. With this, it is taking an aim at Hindustan Unilever (HUL) which is the current leader in the FMCG segment.

Ruchi Soya’s current market capitalisation stands at ₹42,700 crore, a 84 times jump from its ₹500 crore market cap in January 2020. In comparison, HUL is currently trading between ₹2,150-2,200, and has a market capitalisation of over ₹5 lakh crore.

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