Ruchi Soya stock tanks after the Baba Ramdev-backed company announces ₹4,300 crore FPO at a 35% discount

• Ruchi Soya is one of the leading edible oil makers in the company.
• It is backed by Baba Ramdev’s Patanjali, which owns a 98.9% stake in the oil maker.
• Ruchi Soya’s shares have surged over 43% in the last one month.

Ruchi Soya’s shares tanked during the first half of the trade today after the Baba Ramdev-backed edible oil maker announced a follow-on public offer (FPO), looking to mop up ₹4,300 crore from the market at a discount of 35%.

As of 12:50 p.m., on March 21, Ruchi Soya’s shares were down by over 8%, after recovering from a big slump of 17% earlier in the day.

Ruchi Soya’s shares have seen a massive bull run in the past one month, gaining over 43% in the period. Every ₹10,000 invested in the company on February 23 was worth ₹14,325 on March 15.

Today’s fall could be due to two reasons – short-term traders exiting the stock after booking healthy profits, and the ₹4,300 crore FPO that is fixed at a discount of 35%.

According to the company’s exchange filings, the price band for the ₹4,300 crore FPO is between ₹615-650. Even at the upper band of ₹650, it is at a discount of 35% to the closing price on Thursday, March 17.

The Ruchi Soya FPO opens on March 24 and closes on March 28.

What is an FPO?

FPO, short for follow-on public offering, is one of the ways for listed companies to raise additional capital.

As the name suggests, it is a follow-on offering – any public issue of shares to investors after the initial public offering (IPO) is an FPO.

There are two types of FPOs – dilutive and non-dilutive. Dilutive FPOs are those in which new equity shares are issued, and post issue, the shareholding of the existing investors gets diluted in percentage terms.

Non-dilutive FPOs are those in which existing equity shares held privately are offered to the public.

The Ruchi Soya FPO is dilutive.

Why is Ruchi Soya coming out with an FPO?

Ruchi Soya’s parent company, Patanjali, owns 98.9% of the total shares of the company, leaving only 1.1% to the public.

Since Ruchi Soya is a listed company, it has to have at least 25% of the total shares held by the public, according to the norms outlined by the Securities Exchange Board of India (SEBI), the market regulator.

To bring down the promoter holding, Ruchi Soya has now come out with the ₹4,300 crore FPO after receiving approval from SEBI in August last year.
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