Shares of Patanjali Foods experienced a significant shift on Wednesday, 4th September. Early in the trading session, the company's stock reached an all-time high of ₹2,030 per share on the Bombay Stock Exchange (BSE). However, this momentum was short-lived, as the stock subsequently declined, falling into negative territory.
By the end of the day, the stock was trading at ₹1,934.10, marking a 0.84% drop from the previous close. This fluctuation highlights the unpredictability of investing in the stock market, where rapid changes can occur within a single trading day.
Legal troubles and investor sentiment
The decline in Patanjali Foods' share price comes amid legal challenges that the company is currently facing. Last week, the Delhi High Court sought the Centre's response to a petition alleging misbranding of Patanjali’s "Divya Dant Manjan" as a vegetarian product. The petition claims that the dental care product, which carries a "green dot" indicating it is vegetarian, contains fish extract—a non-vegetarian ingredient.
Justice Sanjeev Narula has issued notices to the Centre, the Food Safety and Standards Authority of India (FSSAI), Patanjali, Divya Pharmacy, Yoga Guru Ramdev, and other related parties. The case, brought forward by lawyer Yatin Sharma, argues that the inclusion of the "green dot" on the packaging constitutes misbranding under the Drugs and Cosmetics Act. The next hearing on this matter is scheduled for November.
The legal scrutiny surrounding Patanjali Foods may have contributed to the market's reaction as investors weigh the potential implications of these allegations. For those investing in the stock market, such legal issues can introduce uncertainty, affecting investor confidence and stock performance.
Acquisition plans and market strategy
In addition to the legal issues, Patanjali Foods has been in the spotlight due to its strategic plans. Earlier this year, the company announced that it would evaluate a proposal to acquire the non-food business of its promoter group, Patanjali Ayurved, led by Baba Ramdev. This potential acquisition could encompass categories such as dental care, home care, and personal care products—areas that account for 50-60% of the promoter's total turnover.
In a regulatory filing, Patanjali Foods confirmed that its board had discussed the initial proposal from Patanjali Ayurved Ltd. The board granted in-principle approval to explore the most efficient ways to enhance synergies with Patanjali Ayurved's non-food portfolio. This move, however, did not specify which non-food products the company might acquire.
Historical performance and recent trends
Patanjali Foods has seen a robust rally in its stock price over the past 12 months, with shares surging by approximately 54%. This strong performance followed the company’s rebranding from Ruchi Soya Industries to Patanjali Foods, which took effect on 24th June 2022. The rebranding was part of a larger strategy after Baba Ramdev’s Patanjali Ayurved acquired Ruchi Soya for ₹4,350 crore through an insolvency process in 2019.
Despite the recent downturn, Patanjali Foods remains a significant player in the Indian market, particularly within the edible oil sector. The stock’s early surge and subsequent decline underscore the volatility that can accompany even well-established companies, reminding investors of the complexities of investing in the stock market.
As the company navigates its legal challenges and potential acquisitions, the market will closely monitor how these developments impact its stock performance in the coming months.
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