INDIA – Yoga guru Baba Ramdev’s Patanjali Ayurved has hired two investment banks to raise structured credit worth Rs1,000 crore, two people aware of the development said.
One of the two investment banks is a Hyderabad-based boutique firm specializing in the consumer packaged goods segment, the people mentioned above said on condition of anonymity, adding that the banks have been asked to approach both foreign and domestic funds.
In August, Patanjali had announced its intention to borrow Rs1,000 crore to finance its expansion plans.
“The discussions assume significance since this is for the first time since its founding in 2007 that Patanjali is exploring an equity-linked fund-raise option,” the first of the two persons cited above said.
Along with the typical interest payment associated with debt, structured credit may include an equity stake in the form of attached warrants or a conversion feature similar to that of a convertible bond.
The group has so far rejected offers, including from private equity funds, to sell equity stakes.
In a recent interview to Moneycontrol.com, Acharya Balkrishna, Patanjali’s group chief executive officer, also ruled out an initial public offering in the near future.
“The investment banks have also been asked to explore possible investment structures that suit long-term capital needs of the group,” the first person cited above said.
“They (I-banks) have approached several foreign and domestic structured credit funds with an initial proposal,” said the second person.
“Discussions are at an exploratory stage presently, but the company wants to tie up the funding in the next few months,” this person said.
“Among those who have been approached is a large global fund with private equity and structured credit operations in India.”
A Patanjali spokesperson did not respond to emails and phone calls on Wednesday.
The second person stated that Patanjali has a comfortable liquidity position, adding, “Compared to conventional bank credit, a structured credit investment which typically is debt with an equity upside will give Patanjali more flexibility over the repayment structure and tenor, as well as over the use of the funds.”
In recent statements, Patanjali has said that it wants to raise long-term project finance to fund its upcoming food parks.
The company, which currently has 50 manufacturing units, wants to scale up production at its existing facilities in Maharashtra, Assam, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh and Uttarakhand, a company spokesperson told BloombergQuint in August.
One of the fastest growing consumer goods groups in India, Patanjali group announced a 111% rise in revenues to Rs10,561 crore in fiscal year 2016-17, with group companies Patanjali Ayurved Ltd, Divya Pharmacy Ltd and Patanjali Gramodhyog Ltd clocking Rs9,346 crore, Rs870 crore and Rs345 crore, respectively.
In 2015-16, Patanjali Ayurved, the group’s flagship company, saw its revenue more than double to Rs4,812 crore from Rs2,007 crore in 2014-15.
In January, credit rating agency Icra Ltd, while upgrading Patanjali Ayurved’s long-term credit rating, attributed its strong performance to its increasing brand penetration thanks to better marketing and the loyal following of founder and yoga guru Baba Ramdev.
Icra maintains that while the above factors combined with relatively lower selling and administrative overheads have enabled the company to maintain its healthy profitability margins in a highly competitive market, its reliance on external debt may go up as it charts an aggressive growth plan.
Patanjali recently announced its foray into the branded apparel space with its “swadeshi” line of clothes for men, women and children by April 2018, targeting sales of Rs5,000 crore in the first year.
The apparel line will initially be made available across 250 exclusive retail outlets, the Hindustan Times reported in August.