Patanjali Ayurved Ltd (PAL) is one of the promoters of Patanjali Foods. File
| Photo Credit: Reuters

Edible oil major Patanjali Foods Ltd on July 1 said it will acquire Baba Ramdev-led Patanjali Ayurved’s home and personal care business for ₹1,100 crore, as part of its efforts to become a leading FMCG company.

Patanjali Ayurved Ltd (PAL) is one of the promoters of Patanjali Foods. The acquisition falls under related party transactions being undertaken on a fair value and arms’ length basis.

In a regulator filing, Patanjali Foods informed that the board has approved the “acquisition of the entire non-food business undertaking i.e. hair care, skin care, dental care and home care carried out by PAL, including but not limited to all movable assets, immovable properties, contracts, licenses, books and records, employees and certain assumed liabilities of PAL through a slump sale arrangement on a going concern basis”.

This is subject to the approval of shareholders, lenders and other necessary approvals. The company will have to get approval from the Competition Commission of India.

“The consideration for the acquisition shall be ₹1,100 crore, payable by the company to the seller in tranches…,” it added.

Patanjali Foods will pay the entire amount in five tranches.

Patanjali Foods CEO Sanjeev Asthana said the company would fund this deal through internal cash reserves.

He said the deal is expected to be concluded in the current quarter.

Mr. Asthana said the company will acquire major brands like Dant Kanti and Kesh Kanti.

“The turnover of the business which we have acquired was around ₹2,800 crore last fiscal year,” he said, adding that the deal would boost the company’s revenue and net profit.

In the filing, Patanjali Foods, erstwhile Ruchi Soya, said the deal will accelerate the company’s transition into a leading FMCG company.

The home and personal care business of Patanjali Ayurved currently has strong brand equity in India’s FMCG space and enjoys a loyal consumer base, it added.

Presently, it caters to four key segments – dental care, skin care, home care, and hair care.

Patanjali Foods and Patanjali Ayurved have also agreed to enter into a licensing agreement, permitting the company to use the trademarks and associated intellectual property rights, owned by the latter.

“The transfer of the home and personal care business has been mutually negotiated between the company and Patanjali Ayurved (basis valuation exercises conducted by independent valuers) for a lump sum consideration of ₹1,100 crore only”.

The acquisition will lead to a consolidation of the ‘Patanjali’ brand FMCG products portfolio.

“The acquisition will bring along with it multiple key synergies in terms of brand equity and enhancements, product innovations, cost optimisation, infrastructure & operational efficiencies and positive impact on market share,” Patanjali Foods said.

Pursuant to the approval of the board, Patanjali Foods will now take the necessary steps to execute the definite agreements in connection with the acquisition as well as apply for necessary approvals integral to the transaction.

Separately, a licensing arrangement for a 3% turnover-based fee along with other conditions has been agreed upon between Patanjali Foods and the PAL.

Patanjali Foods, which the PAL acquired through an insolvency process, had posted a total revenue of ₹31,961.62 crore in the last fiscal as against ₹31,821.45 crore in the preceding year.