Ruchi Soya Industries share price ended 5% lower today after the edible oil producer reported a loss for the quarter ended March 2020. The micro cap stock fell after 22 consecutive sessions of gain today. Since May 27, the stock has climbed 198% till date. On May 27, the stock closed at Rs 515 and opened at Rs 1,535 on June 29.
Since Ruchi Soya's relisting on January 27, 2020 at a price of Rs 16.10, the stock has zoomed 9,434% in five months taking the market cap of the firm to nearly Rs 45,000 crore.
The fall in share price came today after the firm reported a loss of Rs 41.25 crore for Q4 against profit of Rs 32.11 crore in the corresponding period of 2018-19. The stock ended 5% lower at Rs 1,432 in trade today against previous close of Rs 1507 on BSE. At open, the stock hit all-time high of Rs 1535 on BSE.
Loss came on the back of inclusion of exceptional items of Rs 18.43 crore in Q4.
However, for FY20, the firm logged a huge profit of Rs 7,672 crore due to exceptional income of Rs 7,447 crore arising out of debt and equity restructuring.
The rise in stock in five months is not backed by financial performance of the firm. This was the first quarterly earnings after Ruchi Soya stock got relisted on stock exchanges. In December 2019, Patanjali took full control of Ruchi Soya.
Patanjali settled Rs 4,350 crore of dues Ruchi Soya had towards financial creditors by infusing Rs 1,100 crore equity and arranging another Rs 3,250 crore via debt.
However, retail shareholders were among the biggest losers of the restructuring process as Patanjali Group had already notified to BSE and NSE in December 2019 that it has reduced the equity share capital of the existing shareholders by 99 percent. It means those who were holding 100 shares of the company were left with 1 share.
The current rally in the stock price is likely due to low free float or equity shares available with public shareholders.
A huge 99.03% stake or 29.29 crore shares are held by just 15 promoters. Of these, Patanjali Ayurveda holds 14.25 crore shares or 48.17% stake.
Patanjali Parivahan Private Limited has 5 crore shares or 16.90% stake in Ruchi Soya. While Divya Yog mandir trust holds 6 crore shares or 20.28% stake, Patanjali Gramudhyog Nyas has 13.52% stake or 4 crore shares. Apart from promoters, 0.97 percent stake or 28.59 lakh shares are held by 82,007 public shareholders.
Of these, 0.82% equity held by 24.20 lakh shareholders who have infused individual share capital of up to Rs 2 lakh in the company. So, short supply of shares in public domain may be a reason behind stupendous rise in share price since January 27. Another reason is acquisition by a popular company like Patanjali which may have worked in favour of the stock.
On January 24, ahead of the listing of shares, Baba Ramdev said they were planning to liquidate 20-25 percent of Ruchi Soya shares in the next 2-2.5 years. The statement signals implementation of a Sebi norm that a firm has to raise the public shareholding to 10 percent in 18 months of its relisting. After that, minimum public shareholding has to reach 25 percent in three years.
Abhijeet Ramchandran, co-founder and trainer at Tips2Trade said the share has rallied too much in a short span of time in absence of any reasonable factor. He sees opportunity to enter the stock when it falls to Rs 980 to Rs 1,000 level.
"When promoters will sell stake, the stock price will fall significantly," he added.
In May this year, Brickwork Ratings assigned a stable outlook to company's long-term and short-term borrowings.
"Ruchi Soya's liquidity position remains adequate as of nine months ended financial year 2020, considering the absence of fixed debt obligations during financial year 2021, a low average collection period and availability of unencumbered liquid assets of over Rs 380 crore for meeting its required working capital needs," the ratings agency said.