Patanjali Foods share price jumps on THIS acquisition buzz. Should you buy as Jefferies initiates coverage?

Patanjali Foods share price rose as much as 1.52 per cent on Monday's trading session after global brokerage firm Jefferies initiated coverage on the stock with ‘buy’ rating.

At 9:30 am, Patanjali Foods stock was trading at ₹1,736 on March 17. The stock has fallen over 4 per cent in over a month.

Jefferies has assigned a target price of ₹2,050 per share to Patanjali Foods, suggesting a potential 19 per cent increase from the previous session's closing price.

Jefferies highlights several factors contributing to their optimistic outlook on Patanjali Foods. The company has diversified its product range and is expanding both organically and through the acquisition of high-margin portfolios from its parent company.

Notably, higher-margin segments such as Foods and Home & Personal Care contribute approximately 60 per cent to Patanjali Foods' EBITDA and account for over 70 per cent of the company's share valuation.

The brokerage anticipates that Patanjali Foods will achieve high single-digit revenue growth alongside margin expansion in the future. Over the past year, Patanjali Foods' stock has risen by about 20 per cent, whereas the benchmark Nifty 50 index has seen a modest increase of 1.6 per cent.

Patanjali Ayurved buys stake in Magma General Insurance

On March 13, Adar Poonawalla's Sanoti Properties agreed to sell its stake in Magma General Insurance to Baba Ramdev's Patanjali Ayurved and the Dharampal Satyapal Group (DS Group). This transaction, valued at ₹4,500 crore, will result in Patanjali and DS Group collectively holding a 98% stake in the insurance company.

According to a press release, the transaction is subject to regulatory approval. Patanjali Ayurved recognizes substantial growth opportunities in India's underpenetrated general insurance sector. Coupled with favorable regulatory reforms, the company envisions a clear path for expansion, the release said.

“We are confident that it will continue to make a strong contribution to the general insurance industry under the new ownership of Patanjali Ayurved and the DS Group,” said Adar Poonawalla, Chairman, Serum Institute of India.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.