In fact, conviction in Patanjali’s stock has been growing for several quarters now. Since June 2023 institutional investors, both domestic and foreign, have consistently increased their stakes in the company, while promoters have offloaded shares.
As the broader FMCG sector recovers amid a revival of rural demand, should investors take special note of Patanjali Foods?
From oil to FMCG
Incorporated in 1986, and formerly known as Ruchi Soya, Patanjali Foods has positioned itself as a ‘natural’ alternative to conventional processed foods. It leads the market in palm oil and trails only Adani Wilmar in soyabean oil. In FY22, 93% of its revenue came from edible oils.
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But over the years it has strategically diversified into high-margin segments such as food and home & personal care (HPC). It acquired the biscuits business in 2021, and the food line from its parent Patanjali Ayurved in 2022. Since then, new product launches have helped expand the segment from 6.8% of revenue in FY22 to 24.8% in FY25.
Meanwhile, HPC diversification has been supported by its acquisition of the line from its parent in July 2024. Edible oils now contribute only about 70% of revenue.
Diversification excites investors
Dependence on edible oil had kept the company’s top and bottom lines vulnerable to fluctuations in oil prices. For instance, the company’s revenues remained flat in FY24 owing to a drop in oil prices. Given that India imports more than 80% of its requirement for crude edible oil, the segment is exposed to supply-chain shocks from geopolitical conflicts.
The strategic diversification into the broader FMCG market has thus enthused investors. The stock has rallied by 20% since June 2023, outperforming the sector’s 4% return during the period.
Margins had left investors wanting
Since the company acquired Ruchi Soya in FY21, its revenues have more than doubled to almost ₹35,000 crore. Patanjali Foods is now the country’s third-largest FMCG player by revenue.
The company has mass appeal thanks to its association with yoga guru Baba Ramdev. Its reach has been enhanced further through its direct distribution channels, comprising more than a million retail outlets, Patanjali Chikitsalayas and Divya pharmacies. It also has about 400 modern outlets, all while maintaining competitive pricing to cater to the masses.
The flip side of this mass appeal is that the company’s margins are miniscule – under 5%. Smaller peers such as Colgate Palmolive boast of margins as high as 35%, while Patanjali does not even feature in the top five. In fact, its margins have shrunk over the years – from more than 4% in FY21 to 2.4% in FY24.
Margins improved in FY25
In FY25 the company reported 8% growth in revenue, led by 11% growth in its mainstay, edible oils. This, along with revenue from the new HPC segment, helped negate the 11% degrowth in food and FMCG.
The company reported phenomenal 70% growth in profit after tax (PAT) during the year, again supported by oil. Notwithstanding higher rural demand, the Ebitda margin in food and FMCG shrank from 12.8% in FY24 to 7.9% in FY25 owing to higher raw-material prices. Ebitda for the segment fell by ₹557 crore – from ₹1,230 crore in FY24 to ₹673 crore in FY25.
But the edible oil and HPC segments supported overall profitability. As FY24’s slowdown in edible oil prices gave way to strength in FY25, the segment turned profitable. From an Ebitda loss of ₹76 crore in FY24, FY25 saw a turnaround to profit of ₹978 crore. The high-margin HPC segment also contributed ₹152 crore to operating profit during the year.
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Patanjali has also been slashing its debt. Debt-to-equity shrank from 0.10 to 0.07 in FY25. This helped reduce finance costs by ₹105.5 crore during the year, further supporting the bottom line.
Margin outlook is promising
The newly acquired HPC line is margin-accretive, thanks to synergies brought about by Patanjali Ayurved’s brand equity along with cost-efficiencies and operating leverage. Its full benefits are expected to flow in from FY26.
The segment is concentrated in north and west India, which leaves ample scope for expansion in the south, where the company’s distribution network is already strong. In FY26, HPC is expected to contribute 18% to the company’s Ebitda.
Patanjali has also been adding premium products to its portfolio. Its entry into categories such as sports nutrition, dry fruits, and shower gels is expected to boost margins. These initiatives should help cushion at least some of the impact of subsequent increases in raw material prices.
Strategic initiatives are a mixed bag
Apart from the margin-accretive HPC segment, Patanjali plans to set up a palm oil mill in Mizoram by the end of the year. This should complement its 74,000 hectares of land under palm oil cultivation, and further its backward-integration initiative.
The company has also entered wind power generation, but this contributes only 0.1% of revenue. It has also invested in the construction and infrastructure company KBC Global. The Patanjali Group has also entered general insurance with Magma General Insurance. Buoyed by such strategic initiatives, the group aims to hit ₹1 trillion in revenue by 2028.
Brand equity risks remain
In May 2024, Patanjali came under the regulator’s scanner for failing to meet food safety standards. The incident pertained to samples collected in 2019 – before the foods business was brought under Patanjali Foods.
But this happened again in January 2025, when the Food Safety and Standards Authority of India (FSSAI) ordered the company to recall a batch of red chilli powder for exceeding the maximum allowed pesticide residue. It has also been embroiled in conflicts with the Supreme Court regarding its scientifically unverified claims about the benefits of Ayurveda.
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Finally, while Ramdev does not hold a stake in the company, he is the face of the brand. Any damage to his reputation would thus threaten the company’s brand equity.
Lofty goals amid stiff competition
The company aims to tap exports, make acquisitions, and enter new categories to grow its revenue to ₹50,000 crore by 2028. This translates to 14% compound annual growth.
However, it faces intense competition in the sector. While Dabur used to be the only other brand that marketed its products as ‘natural’, other legacy FMCG players are now doing so. The increase in Patanjali’s marketing spends as it looks to retain market share could hit its already slim margins.
Analysts expect the company’s revenue to grow at only about 9% annually. Its target price has been pegged at ₹2,100, reflecting 24% upside from current levels. But near-term headwinds could cause volatility in the stock, which could be exacerbated by its recent inclusion under futures and options (F&O) contracts.
For more such analysis, read Profit Pulse.
Ananya Roy is the founder of Credibull Capital, a Sebi-registered investment adviser. X: @ananyaroycfa
Disclosure: The author does not hold any shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
