Patanjali Foods buys PAL non-food unit for ₹1,100 cr

Deal announced through an exchange filing

Patanjali Foods Ltd said it will acquire the non-food business of its promoter entity, Patanjali Ayurved Ltd (PAL), in a transaction valued at ₹1,100 crore. The company disclosed the plan in a regulatory filing dated July 1, 2024. The stated aim is to speed up Patanjali Foods’ shift from an edible oils-focused company to a broader fast-moving consumer goods (FMCG) player. The acquisition covers PAL’s home care, skin care, dental care, and hair care divisions. Patanjali Foods described the deal as a related-party transaction, and said the terms were negotiated on a fair value and arm’s length basis. The announcement came after market hours.

What Patanjali Foods is buying

The board of Patanjali Foods has approved the acquisition of the entire non-food business undertaking through a slump sale. The transaction includes movable and immovable assets, contracts, licenses, employees, and certain liabilities tied to the undertaking. The non-food business operates from a manufacturing facility at the Patanjali Foods and Herbal Park in Haridwar, Uttarakhand. The deal brings brands such as Dant Kanti (dental care) and Kesh Kanti (hair care) under Patanjali Foods.

Patanjali Foods’ existing portfolio includes edible oils under the Ruchi Soya franchise, and packaged foods such as biscuits, cookies, breakfast cereals, and noodles. The acquired non-food portfolio includes categories such as toothpaste, shampoo, and soaps, as part of the broader home and personal care (HPC) mix.

Consideration, structure, and payout schedule

The total consideration is a lump sum of ₹1,100 crore, subject to customary closing date adjustments as set out in the business transfer agreement. Patanjali Foods CEO Sanjeev Asthana said the deal will be funded entirely through internal cash reserves. Payment is to be made in five tranches. One filing referenced tranches split as 20%, 20%, 45%, 10%, and 5%.

The first tranche is ₹220 crore and is scheduled to be paid within 10 business days of receiving required approvals. The final tranche is ₹55 crore and is linked to the successful conveyance of all properties related to the business.

A separate 20-year brand licensing agreement

Alongside the acquisition, Patanjali Foods and PAL have also entered into a 20-year licensing agreement. Under the stated terms, Patanjali Foods will pay a license fee equal to 3% of the actual gross sales value of the products covered by the arrangement. The agreement also includes a minimum annual payment of ₹83 crore, which becomes effective once the company’s infrastructure is fully operational. The licensing arrangement is meant to allow Patanjali Foods to use trademarks and associated intellectual property rights owned by PAL.

Turnover figures cited for the acquired business

Company commentary in the coverage cited turnover for the acquired non-food business at approximately ₹2,800 crore in the previous fiscal year. Separately, another disclosure in the provided material cited turnover of ₹6,199 crore for the fiscal year ended March 31, 2024. The filing-related narrative also notes Patanjali Foods reported total revenue of ₹31,961.62 crore for the previous fiscal year, compared with ₹31,821.45 crore in the year before.

Approvals and regulatory path

Patanjali Foods said the board approval is subject to requisite approvals from shareholders, lenders, and regulatory authorities. The materials also referenced approvals from the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI) in the context of closing the acquisition. One update in the provided text stated that the CCI has given approval for the acquisition. The effective date is to be determined upon receipt of the required approvals.

PAL owned a 32.4% stake in Patanjali Foods as of March 31, 2024, as cited in the provided coverage. This ownership link is one reason the deal is categorised as a related-party transaction.

Market reaction and stock movement

The announcement was made after trading hours on July 1, 2024. Earlier that day, Patanjali Foods shares rose 6.81% to close at ₹1,699.65 on the BSE, amid market speculation about a corporate reorganisation. Another market update in the material said the stock rose 3.83% to ₹1,764.40, described as the highest level since it was listed on January 24, 2020, and later traded at ₹1,718.60 as of 10:12 a.m. The same update also cited a 43.07% gain over the last 12 months and an 8.41% gain year-to-date, with the relative strength index at 72.80.

Key numbers at a glance

Payment tranches disclosed

Why the acquisition matters for the listed entity

Patanjali Foods said the primary objective is to consolidate the ‘Patanjali’ FMCG portfolio under a single listed entity. The company also pointed to expected synergies around brand equity, product innovation, cost optimisation, infrastructure use, and operational efficiencies. Analysts quoted in the coverage said the deal could accelerate Patanjali Foods’ transition toward being an overall FMCG company.

The next steps now depend on completing definitive documentation and securing the remaining approvals referenced in the filings and reports. Patanjali Foods has indicated it will pursue the required shareholder, lender, and regulatory clearances to close the transaction and operationally integrate the acquired non-food undertaking.