Patanjali Foods to buy Patanjali Ayurved business for ₹1,100 Crore

2 Jul 2024 , 11:04 AM

Patanjali Foods Ltd, mostly focused on edible oils, announced a ₹1,100 Crore acquisition of Patanjali Ayurved Ltd (PAL)’s non-food business.

Patanjali Foods’ board of directors accepted the stated deal on July 1, 2024, subject to shareholder, lender, and regulatory approvals. The transaction includes PAL’s hair care, skin care, dental care, and home care operations, as well as all associated assets and liabilities.

The acquisition costs ₹1,100 Crore and will be paid in tranches as per the BTA rules. The first ₹220 Crore tranche will be paid within 10 business days of securing CCI, shareholder, and lender approval from the State Bank of India. Subsequent payments will be made, with the last ₹55 Crore owing upon the conveyance of all business properties.

The non-food business is run from the production facility at Patanjali Foods & Herbal Park in Haridwar, Uttarakhand. PAL’s turnover for March 31, 2024, was around ₹6,199 Crore.

This is a related party transaction because PAL is one of Patanjali Foods’ promoters. Key players include Ram Bharat, Managing Director of Patanjali Foods and Director of PAL, and Acharya Balkrishna, Chairman of Patanjali Foods and Managing Director of PAL, who owns 98.54% of PAL’s shares. The transaction is performed on a fair value and arm’s length basis.

The acquisition is in the fast-moving consumer goods (FMCG) business and aims to broaden Patanjali Foods’ product offerings. The deal is subject to clearance from the Competition Commission of India (CCI) and shareholders, and the effective date will be determined once these permissions are received.

Patanjali Foods, the licensee, acquired licensing rights from PAL, the licensor. PAL’s revenue for the fiscal year ended March 31, 2024, was roughly ₹6,199 Crore. Because PAL is one of Patanjali Foods’ promoters, the transaction is considered a connected party.

Patanjali Foods’ licensing agreement requires a fee of 3% of the product’s total sales value, with a minimum annual payment of ₹83 Crore, after the company’s infrastructure is completed.

This agreement is carried out on a fair value and arm’s length basis. This arrangement does not include the acquisition of any shares; rather, it focuses only on licensing rights and accompanying payments.

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