Care Ratings downgrades Patanjali due to concerns over Ruchi Soya merger

Care Ratings has downgraded the credit ratings of Baba Ramdev’s Patanjali Ayurved due to concerns over its financial standing in light of the merger with Ruchi Soya. The ratings agency has downgraded Patanjali’s long-term bank facilities to A- from A+. Care has also placed the ratings on “Credit Watch with Negative Implications”. Patanjali Consortium Adhigrahan Pvt – a venture by Patanjali Ayurved – and three other companies controlled by Baba Ramdev are going to take over Ruchi Soya Industries for Rs 4,350 crore.

“The revision in the ratings of the bank facilities of Patanjali Ayurved Limited (PAL) take into account expected weakening of its financial risk profile on account of large outflow of funds from PAL to Patanjali Consortium Adhigrahan Private Limited (PCAPL), Special Purpose Vehicle created for the purpose of acquisition of Ruchi Soya Industries Limited (RSIL),” CARE Ratings said in a statement.

Out of the Rs 4,350 crore offered by Patanjali group, Rs 4,235 crore would be utilised to pay creditors while Rs 115 crore would be used for capital expenditure and working capital requirements of Ruchi Soya. As per the filing, Rs 4,053.19 crore will be paid to secured financial creditors, Rs 40 crore to unsecured financial creditors, Rs 90 crore to operational creditors, Rs 25 crore to clear statutory dues, Rs 14.92 crore to workmen/employees and Rs 11.89 crore to provide counter bank guarantee.

“Going forward, PAL’s ability to sustain its favourable brand image and leveraging on the same to grow its operations profitably, manage its debt coverage indicators within a balanced capital structure, utilize its working capital efficiently, the outcome of the on-going investigation on the promoters along with linkages and integration of RSIL with Patanjali group would be key rating sensitivities,” Care said in its statement.

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