Since February 6, 2020, the stock of Ruchi Soya Industries, one of the largest manufacturers of edible oil in India, has rallied 1,723 percent.
Despite the widespread carnage seen in the broader markets since the end of February, the stock was locked in the upper circuit for the 66th day in a row on May 6.
The company currently has a market capitalisation of Rs 14,046.53 crore and ranks at 141st position in the overall m-cap ranking of BSE listed companies.
The sharp run-up in the scrip comes less than three years after the company was dragged to the National Company Law Tribunal (NCLT) by financial creditors Standard Chartered Bank and DBS Bank under the Insolvency and Bankruptcy Code.
Ruchi Soya Industries owed around Rs 9,345 crore to its creditors.
In July 2019, the NCLT accepted Patanjali Ayurved's Rs 4,350-crore bid to acquire Ruchi Soya. Under the resolution plan, the Baba Ramdev-led company transferred the amount to a special purpose vehicle 'Patanjali Consortium Adhigrahan Private Limited', which amalgamated with Ruchi Soya.
Of the total, Rs 4,235 crore was to be used for settlement of claims of creditors, who accepted a 60 percent haircut, and the balance of Rs 115 crore was to be used for capital expenditure and working capital requirements of Ruchi Soya. Till December 31, 2019, Rs 4,005 crore had been paid to the creditors.
Post-acquisition, Patanjali reduced the equity capital of Ruchi soya from Rs 66.82 crores to Rs 66.82 lakh. This change resulted in reducing the number of shares held by an investor in the ratio of 100:1.
The Patanjali group further infused equity capital of Rs 204.75 crore at par value and Rs 3,233.36 crore as debt.
Following the restructuring, the public holing came down from 84.47 percent on September 19 to 1.13 percent in December 2019. Meanwhile, promoter holding increased from 15.53 percent to 98.87 percent.
The stock was delisted from the bourses on November 13, 2019 and the last traded price was Rs 3.35. However, accounting for equity dilution, it was Rs 335, noted Atish Matlawala, Sr Analyst, SSJ Finance & Securities.
Since relisting on January 27, 2020, at Rs 17, the stock has jumped circuit to circuit rallying 2,693 percent in the process. It was quoting Rs 474.8 per share on May 6.
Despite the unprecedented rally, Matlawala feels that the stock still has some steam left. According to him, if an investor can enter near the current levels, the scrip will provide excellent returns in the next 12-18 months.
"The circuit to circuit rally has deprived retail investors of participating in the stock. However, we believe that under the new promoter the company has performed well and the stock can touch the levels of Rs 800 in next 12 – 18 months," Matlawala told Moneycontrol.
The company saw a stellar Q3 FY20, where profit before exceptional items and tax rose 24 times to Rs 151 crore against Rs 6.29 crore in the corresponding quarter of the previous fiscal.
Currently, Ruchi Soya is trading under trade-to-trade or ‘T’ segment. Each share purchased under this segment has to be taken in delivery by paying the full amount. In other words, the share cannot be traded on an intraday basis.
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