Ruchi Soy FPO: Ruchi Soya Industries’ stock rose 8 percent to Rs 883 on the BSE in Friday’s intra-day trading, extending Thursday’s 8.5 percent gain after 66.15 million shares were allocated in a follow-up on the public offering (FPO), has started trading on the exchanges as of today. Ruchi Soya shares opened with a gain of 3.8 percent at Rs 850 against the previous close of Rs 818.85 on BSE.
Over the past week, however, the edible oil company’s stock has underperformed the market by falling 12 percent, against a 1 percent rise in the benchmark.
On April 5, 2022, Ruchi Soya had approved the allotment of 66.15 million shares for a total consideration of Rs 4,300 crore, in accordance with the FPO issuance. The company had a fixed issue price of Rs 650 per share. Under the allotment of shares in the issue, the company’s paid-up share capital has been increased from Rs 59.16 crore to Rs 72.40 crore, the company said.
Objectives for the new issuance are repayment/prepayment of Rs 2,664 crore in loans, financing of incremental working capital requirements of Rs 593 crore and the remaining amount will be used for general corporate purposes.
According to SEBI guidelines, the minimum requirement for a public shareholding in a publicly traded company must be 25 percent. For example, Ruchi Soya has announced an FPO as the company’s promoters want to reduce its shareholding to comply with SEBI guidelines.
Ruchi Soya FPO: Should You Sell, Hold or Buy?
According to stock market investors, the bidders who have requested arbitrage profits in Ruchi Soya FPO are advised to make a profit and exit, while those who have applied for Ruchi Soya shares, taking into account the long-term horizon, can make a 50 percent profit and the remaining investment for a 3-month target of Rs 1,000 per share with the trailing stop loss remaining at Rs 740 per share.
Speaking of Ruchi Soya FPO List; Ravi Singhal, Vice-Chairman of GCL Securities, said: “Those who got Ruchi Soya shares during the allotment are advised to gain 50 percent and hold the rest for 3 months, a target of Rs 1,000 each, maintaining a strict trailing stop loss at Rs 740 per share levels.” Ravi Singhal of GCL Securities added that raw material prices in the FMCG segment are soaring and the company has a good buffer stock that would give them a margin advantage in the near term. The company is therefore expected to report strong quarterly results in the short to medium term.
Following the views of Ravi Singhal; Santosh Meena, Head of Research at Swastika Investmart Ltd, said: “The price of Ruchi Soya stock may experience some selling pressure on an immediate basis as it could lead to a decline in FPO arbitrage positions. Therefore, investors who have applied for arbitrage profits should profit while long term investors can stay invested as multiple positive things are going for the company, palm oil and oilseed shortages will improve realizations which bode well for short to medium term profitability.Technically the 700 level should act as an immediate bottom for stock.
Amarjeet S Maurya, AVP – Mid Caps, Angel One Ltd, said: “Ruchi Soya Industries Ltd (RSIL), a part of Patanjali Group, founded in 1986, is one of the leading FMCG brands in the Indian edible oil sector. In terms of valuations, RSIL is currently trading at 34.5x (TTM PE), which is low compared to its competitors Adani Wilmar (TTM PE -80.7x). Furthermore, RSIL has strong brand recall, wide distribution, healthy ROE (FY21). All positive factors, we believe this valuation is at a reasonable level, so we are positive on the stock.”
Disclaimer:Disclaimer: The expert opinions and investment tips contained in this News18.com report are their own and not those of the website or its management. Users are advised to contact certified experts before making any investment decisions.
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