Share price of Patanjali Foods gains on legal victory in tax dispute

Patanjali Foods Ltd witnessed a surge in its stock price, rising over 0.7% to ₹1,836 on February 20, 2025, after the Supreme Court dismissed a ₹186-crore tax demand against the company. This marks the third consecutive session of gains for the FMCG giant.

Background of the Tax Dispute

The tax dispute stemmed from multiple assessment years, with the Income Tax Department raising a demand of ₹186 crore. The National Company Law Tribunal (NCLT) initially struck down the claim, and the Bombay High Court later upheld this decision. The Income Tax Department then filed a Special Leave Petition (SLP) before the Supreme Court, challenging the ruling.

On January 15, 2025, the Supreme Court dismissed the petition, affirming the High Court’s verdict favouring Patanjali Foods. Interestingly, the company was unaware of the hearing and only learned about the dismissal via a tax-related website on February 18, 2025.

With this ruling, Patanjali Foods confirmed that the ₹186 crore tax liability no longer stands, ensuring no financial impact on the company.

Stock Market Reaction

Following this positive development, the stock saw an uptrend, continuing its three-day rally. At around 9:20 am on February 20, shares were trading at ₹1,836, up 0.7% from the previous close on the NSE.

Financial Performance in Q3FY25

Patanjali Foods reported robust financial results for the third quarter of FY25:

• Revenue from Operations: Increased 15.1% YoY to ₹9,103 crore from ₹7,110.7 crore.
• EBITDA: Surged 57.1% YoY to ₹540.5 crore from ₹344.1 crore.
• EBITDA Margin: Expanded to 5.9% from 4.4% YoY.
• Net Profit: Jumped 71.3% year-on-year (YoY) to ₹370.9 crore from ₹216.5 crore in Q3FY24.

Business Expansion and Challenges

On November 1, 2024, the company completed the acquisition of its home and personal care (HPC) business, expanding into dental, skin, hair, and home care categories. Despite this, inflationary pressures and high input costs, particularly for palm oil and wheat, affected overall demand.

• Exports: Reached ₹67.27 crore in Q3FY25, spanning 29 countries.
• Food & FMCG Revenue: Declined ₹2,037.61 crore from ₹2,498.62 YoY, go due to lower commodity prices and weak consumer demand.
• EBITDA Margin (Food & FMCG Segment): Dropped to 7.53% from 10.85% in Q3FY24, influenced by higher advertising costs, raw material inflation, and commodity price volatility.

Conclusion

Patanjali Foods’ Supreme Court victory in the ₹186-crore tax case has fueled positive market sentiment, potentially reinforcing investor confidence. Despite rising costs and weaker consumer demand, the company’s financial performance and expansion into the personal care segment may possibly lead to  long-term growth.