Why Patanjali Foods Share Price is Falling

With the Nifty FMCG index rising 14% in 2022, the confidence of foreign portfolio investors (FPIs) in the long-term growth story of India's consumption trend has remained undaunted.

FMCG stocks emerged as a new favorite of foreign investors.

This optimism is due to the defensive nature of the industry, allowing majority of FMCG giants to survive the storm, and increase in sales and profits despite high energy costs, rising freight costs, and ballooning raw material prices.

No wonder the underperforming stock - ITC became one of the best performing stocks of 2022.

In 2023 however, the markets have started on a volatile note taking cues from the battle between Adani and Hindenburg research.

One stock from the FMCG space - Patanjali Foods - has seen a downtrend in recent days. The stock has declined 16% in the past five days.

This is what triggered the fall.

#1 Lower-than-expected Q3 results

Patanjali Foods (erstwhile Ruchi Soya Industries) reported a 26% YoY (year-on-year) increase in revenue for the December 2022 quarter to Rs 79.3 billion (bn) from Rs 63 bn a year ago.

These numbers were below market expectations. Revenues were also lower sequentially by 7% amid declining demand from the rural areas.

Its net profit registered a 15% YoY growth to Rs 2.7 bn. This was due to an increase in urban demand, a rebound in services, and robust credit expansion.

The operating profit, calculated as earnings before interest and tax, depreciation, and amortisation (EBITDA), declined 12.4% YoY to Rs 3.7 bn, while the margin contracted by 2.1% to 4.6%. This decline was due to a sharp rise in input costs, staff costs, and other expenses.

The input cost rose 27% YoY to Rs 64.7 bn, staff expense increased by 49% YoY to Rs 0.7 bn, and other expenses shot up 50% YoY to Rs 5.4 bn.

Following the quarterly earnings release on 25 January 2023, shares of the company are on a downtrend.

#2 Discontinuation of soybean oil import

The government of India, on 11 January 2023, announced its decision to discontinue the import of crude soybean oil under the tariff rate quota (TRQ) from 1 April 2023.

A tariff rate quota is a quota for a volume of imports that will enter India at specified or nil duty. But after the quota has been reached, the normal tariff applies to additional imports.

The government has earlier exempted customs duty and agriculture infrastructure development cess of on 2 million metric tons yearly import of crude soybean oil to ease domestic prices.

This discontinuation could impact the input cost, driving the price higher. It would further impact the consumption of the oil segment.

This has created negative sentiments for the company along with other companies present in the segment such as Adani Wilmar.

Patanjali Foods derives 76% of its total revenue from the oils and vanaspati segment.

How shares of Patanjali Foods have performed recently

Patanjali Foods share price is down 2% today. Over five days, the shares are trading lower by 14.4%.

The company touched its 52-week high of Rs 1,495 on 22 September 2022 and its 52-week low of Rs 700 on 25 February 2023.

About Patanjali Foods

Patanjali Foods Limited, formerly Ruchi Soya Industries Limited, is the leader in edible oil and soya food businesses in India.

It is engaged in the manufacturing and marketing healthy range of edible oils and soya foods in India.

The company is the first exporter of Soya Bean Meal from India. They are the also leading manufacturer of Textured Soya Protein and Vanaspati.

It is also engaged in the trading of products and the generation of power from wind energy.

The company produces oil meal food products from soya nutraceutical products, biscuits, and value-added products from downstream and upstream processing.

For more details about the company, you can have a look at see the Patanjali Foods company fact sheet and quarterly results on our website.

You can also compare ACC with its peers.

Patanjali Foods vs Adani Wilmar

Patanjali Foods vs Agro Tech Foods

Patanjali Foods vs Ajanta Soya

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