Patanjali Foods' post-peak descent from a ₹73,000 crore valuation now reflects investor caution about the sustainability of its earnings, particularly in edible oils where profitability is under structural pressure.
The valuation reset
The company's stock peaked at ₹670.33 on 16 April 2025, valuing it at a price-to-earnings ratio of 57x based on FY25's net profit of ₹1,283 crore. That multiple was misaligned with the business fundamentals. Edible oils contribute about 40% of total FY26 Ebitda but carry an Ebitda margin of less than 5%, more akin to a trading business than an FMCG operation. Applying high FMCG multiples to a business with such a large low-margin segment overstated earnings quality. The company's overall FMCG Ebitda margin of 10.81% in FY26 also trails peers: Britannia Industries and Hindustan Unilever both report 15%-plus margins.
Q4 performance masks underlying weakness
FMCG business revenue rose 2.6% year-over-year to ₹2,890 crore in the March quarter, with FMCG segment Ebit climbing 16% to ₹276 crore. Within that, discretionary categories showed strength. Biscuits and home and personal care each grew by about 15%, with the Doodh biscuit brand surpassing ₹1,300 crore in annual sales. Softer wheat and stable sugar prices supported biscuit profitability, while seasonal summer demand boosted beverages toward quarter-end.
Yet these gains were eclipsed by deterioration in edible oils. Ebit in that segment fell 31% year-over-year to ₹178 crore as palm oil prices spiked 20% and soya oil prices rose 23%. Freight, insurance, and packaging costs also weighed on margins. Full-year recurring net profit fell 5%, a headwind that the market has already factored into a re-pricing that has eroded roughly half the peak valuation.
Outlook requires cost relief
Management has guided for FY27 volume growth of 3-5% in edible oils, 8-10% in foods, and 15% in home and personal care. ICICI Securities has cut its FY27 EPS estimate by almost 14%, implying earnings 30% below FY26 levels unless input costs abate or the company raises product prices materially. Current valuation now stands at 35x FY27 EPS estimates. Street consensus awaits evidence of earnings recovery before reassessing the stock.