Armed with edible oil major Ruchi Soya, Ramdev’s Patanjali Group is now ready to take on the country’s largest fast moving consumer goods (FMCG) firm Hindustan Unilever (HUL). The Haridwar-based group has set a target of overtaking HUL (in sales) in the next two years, said Ramdev. After the acquisition of Indore-based edible oil maker, the group has only come closer to its co-founder’s dream.
In 2018-19, while HUL posted Rs 38,888 crore revenue, Patanjali Group’s total revenue remained over Rs 10,000 crore. With Ruchi Soya’s Rs 12,830 crore top line last year, the group’s revenue nearly touched the Rs 23,000 crore-mark.
According to Ramdev, in 2019-20 Patanjali’s revenue will surpass Rs 25,000 crore. While HUL is yet to declare its financial numbers for the December quarter, during the first six months (between April and September), its revenue stood at Rs 20,293 crore.
In the last two years, top line growth of the group’s flagship entity Patanjali Ayurved has come down significantly – from 86 per cent in FY17 to 2.4 per cent in FY19. To achieve the target set by its management up to 2022, the group will have to grow at over 20 per cent compound annual growth rate or CAGR.
While Ramdev has set an ambitious target of taking Patanjali Group’s revenue to over Rs 50,000 crore in five years, he is well aware of the challenges ahead. However, unlike earlier, when it had resorted to carpet bombing with dozens of new launches, Patanjali will now focus on organising its house.
Instead of going for a new venture, as soon as the last one is closed, Patanjali will optimise its production and sales with its existing capacity. It will try and expand market share in the categories it is already present in, he said.
Patanjali’s desperate beat for Ruchi Soya is not without a rationale as it will play a key role in the group’s future.
“A group of naysayers was told by MNCs to portray a negative picture that Patanjali will lose the bid (for Ruchi Soya). But we managed to acquire it anyway,” he said.
The plan is to unlock the firm’s potential. Owing to surging expenditures, Ruchi Soya failed to pay its creditors in recent years, while its top line dwindled – falling from a high of Rs 28,411 crore in 2014-15 to less than Rs 13,000 crore last year.
Scaling its business back to the earlier level will further take the Patanjali Group closer to its target. According to Ramdev, Ruchi Soya is expected to grow three times faster than Patanjali Ayurved.
Leveraging Ruchi Soya’s wide distribution network will be in focus. Currently, the firm’s products reach is over 1.1 million outlets through 5,000-odd distributors. “Its distribution network is a big gain for us”, said Lalit Pophale, an advisor to Patanjali Ayurved’s board of directors. By expanding distribution, Patanjali plans to make its products available to 500 million consumers by 2025 from 200 million now.
Moreover, to cut costs, Patanjali aims to bring down the share of imports in Ruchi’s portfolio by increasing local procurement.
Failing to cut expenses has been a major dampener for Ruchi Soya’s earlier management. Between FY16 and FY18, its net loss grew fourfold to Rs 5,573 crore.
Source: Business Standard
