Patanjali Foods well placed to deliver double-digit growth across foods, home and personal care businesses: Jefferies

Patanjali Foods, which derives its popularity from yoga guru Baba Ramdev, is well placed to deliver double-digit growth across its foods and home & personal care (HPC) businesses, investment banking and capital markets firm Jefferies said in a report.

"Patanjali has evolved from an edible oil company to a wider food and FMCG franchise, through organic growth and acquisitions. It is well-placed to deliver double-digit growth across its Foods + HPC business, which will be faster than the overall company and will enable margin expansion as a share of edible oil goes down," Jefferies said.

Jefferies expects Patanjali Foods to post a revenue of $4 billion in the current financial year. It says that edible oils still account for two-thirds of revenue, but its operating profit also known as earnings before interest, taxes, depreciation, and amortisation (EBITDA) comes from non-edible oil categories.

Jefferies added that in FY24, Patanjali Foods' profitability was impacted due to volatile input prices but has recovered strongly in the current financial year, and this trend is expected to continue.

In the edible oils segment, Patanjali Foods is the second-largest player in the country with market leadership in palm oil and second position in soyabean oil.

Patanjali's food and FMCG business has scaled up over the last three years “through a mix of organic growth and further enabled by the acquisition of the biscuit business from the parent in 2021 and the foods business in 2022. Combined these acquisitions provided a revenue of ₹6,100 crore at the time of acquisition, which scaled up to ₹8,900 crore in FY24 through organic growth,” Jefferies said.

Patanjali’s food and FMCG business worth $1.2 billion was comparable to the India business of Tata Consumer and Dabur, and bigger than that of Adani Wilmar.

“This is likely to scale up further in FY25/FY26, as Patanjali Foods announced the acquisition of home & personal care business from Patanjali Ayurveda in mid-2024,” Jefferies noted.

Patanjali Foods' acquisition of the HPC business from Patanjali Ayurveda also adds a large lucrative franchise to its kitty, valued at ₹2,800 crore in revenue in FY24.

"The acquired HPC business is diversified across categories such as oral care, skin care, home care and hair care. Oral care is the hero franchise, where PFL is the fourth player in the market and is probably second in the naturals category (after Dabur). Other large products include body cleansers, dishwashing bars, shampoo, aloe vera gel etc. HPC business has revenue concentration in a few states in North and West India, while there is an opportunity to build a presence in South India given Patanjali Foods has meaningful distribution here from the Ruchi Soya acquisition. The business was consolidated from Nov-2024 into PFL's financials and will contribute fully in FY26, accounting for 18% of EBITDA," Jefferies said.

Patanjali Foods shares have so far this year declined 1.64% outperforming the NIFTY50 index, which has fallen 3.42%.

In the quarter ended December 2024, Patanjali Foods net profit rose 71% to ₹371 crore from ₹216.54 crore in the same period last year. Its revenue from operations advanced 15% to ₹9,103 crore as against ₹7,910 crore in the year-ago period.