Patanjali Ayurved strikes maiden deal, acquires RH Agro’s rice mill for $10.5 mn
Other | Photo Credit: Reuters

Making its first inorganic expansion move, yoga guru Baba Ramdev-endorsed Patanjali Ayurved Ltd has acquired RH Agro Overseas Pvt. Ltd's rice mill in Sonipat, Haryana for Rs 70 crore (around $10.5 million) to manufacture its packaged rice products, The Times of India reported.

The FMCG group has also signed agreements to take four other rice mills on lease to expedite the launch of various rice-based products, the report said.

Patanjali and RH Agro did not immediately respond to VCCircle email queries but Acharya Balkrishna, managing director of Patanjali Ayurved, told the newspaper, "The acquisition will give us technical know-how in rice processing."

He added that Patanjali has partnered thousands of rice farmers in various parts of the country to produce traditional variants of rice.

According to a report published by Moneycontrol last month, the privately held firm expects to grow its packaged rice business to Rs 1,000 crore by March 2017.

The firm already has rice mills in Haryana, Madhya Pradesh, Telangana and Punjab, the The Times of India report said.

This marks the third deal in the rice business this year after public-listed LT Foods acquired HUL’s rice export business for $3.7 million in March and snapped the 817 Elephant brand of rice from its Amritsar-based parent company Deva Singh Sham Singh (DSSS) to strengthen its presence in Canada, the US and Israel.

The rice business in the country is highly fragmented with the market dominated by loose and unpacked rice sold by local retailers. However, emergence of modern trade and large retailers has created a few large brands, especially for premium long grain products. These were traditionally meant for exports but have been steadily finding a large consumer base in India itself.

The large FMCG and food firms are not present in the rice business, but with Patanjali entering the fray it may shake up the market with some domestic peers looking at the business opportunity. In the flour business, ITC has already built a large presence with its Aashirvaad brand.

The rise of Patanjali

At a time when the FMCG sector at large is still reeling under slow growth due to two consecutive years of poor monsoon, Patanjali has been growing at a break-neck speed. The firm hit a turnover of Rs 5,000 crore for the financial year ended 31 March 2016, compared with Rs 2,006 crore in the previous year. The privately held firm is targeting revenues of Rs 10,000 crore in the current financial year.

It has been slowly eating into the market dominated by large FMCG firms such as Nestle, Hindustan Unilever (HUL) and Colgate.

In addition to rice, the firm sells other food offerings including pasta, noodles, breakfast items such as museli and nutritional products. It also has a personal care range including toothpaste Dant Kanti.

Patanjali’s top selling product, however, is ghee or clarified butter that accounts for nearly 35% of its turnover, followed by toothpaste, hair cleansers, wheat flour and honey.

Balkrishna told VCCircle earlier this year that the firm was investing Rs 1,000 crore in expanding its manufacturing facilities to bridge the demand for its products. Its products such as atta (wheat flour) and juices are processed at its plant in Haridwar. The same factory also makes skin- and hair-care products while its factory in West Bengal makes 400-500 tonnes of biscuits every day.

“We are looking at different states, including Andhra Pradesh, Maharashtra, West Bengal and Madhya Pradesh. We plan to acquire 400-500 acres of land in each state, to build state-of-the-art facilities,” Balkrishna previously said.

Last month, Balkrishna, who is the promoter of the firm, entered the Hurun India Rich List with a net worth of Rs 25,600 crore. He also figured in Forbes rich list.

Patanjali that built its name riding on the personal following of Baba Ramdev with franchised outlets selling only products under its own label, last year opened itself to more distribution partnerships. In October 2015, Patanjali tied up with Future Group to sell its range of products through Future Group’s retail chain Big Bazaar and KB’s Fair Price and Easy Day (formerly under Bharti Retail) outlets. It also sells its products online.

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