Shares of FMCG company Patanjali Foods experienced a significant dip, dropping by 4.13% to ₹1,555 apiece in today’s early morning trade. This decline follows the issuance of a contempt notice by the Supreme Court to Ramdev-owned Patanjali Ayurved and its managing director Acharya Balakrishna. The court took action after the company allegedly reneged on its promise to refrain from making “misleading claims” in advertisements for its medicines.
The apex court’s ruling also imposes restrictions on Patanjali, barring it from promoting products that claim to cure diseases such as heart ailments and asthma. This decision was prompted by evidence presented by the Indian Medical Association (IMA), including a Patanjali advertisement in The Hindu newspaper and a press conference where the company asserted complete cures for sugar and asthma through yoga.
The court found Patanjali in violation of a previous order, which explicitly prohibited the dissemination of misleading advertisements and claims by the company.
In response to the Supreme Court’s actions, Patanjali Foods issued a regulatory filing on the same day, asserting its independence from the legal proceedings. The company clarified that the observations made by the Supreme Court do not pertain to Patanjali Foods Limited, an independent listed entity that operates solely in the edible oil and food FMCG products sector.
Despite this clarification, investors reacted to the news, resulting in a decline in the company’s share price in the early morning trade.
Moving beyond the legal challenges, Patanjali’s financial performance for the third quarter (Q3FY24) of the fiscal year 2023–24 reflects a mixed picture. The company reported revenue from operations amounting to ₹7,910.7 crore, signaling a marginal growth of 1.1% compared to the previous quarter. Total income, including other sources, reached ₹7,957.3 crore.
However, the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at ₹390.6 crore, with a declining EBITDA margin of 4.9%, down from 5.3% in the preceding quarter (Q2FY24) and 5.1% in the same quarter of the previous year.
Quarterly Profit After Tax (PAT) witnessed a decrease, standing at ₹216.5 crore, down from ₹254.5 crore in the third quarter of the previous fiscal year.
Despite these challenges, Patanjali reported export sales of ₹62.1 crore for the quarter, contributing to a total revenue from exports amounting to ₹266.2 crore for the nine-month period ending in the third quarter of the fiscal year 2023–24.
The company faces a dual challenge of legal scrutiny and financial performance amidst the evolving landscape of the FMCG sector, where consumer trust and regulatory compliance play crucial roles in sustaining growth and profitability.
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