A file photo of Orchid Chemicals promoter Raghavendra Rao. Photo: Hemant Mishra/Mint
S Bridget Leena : Live Mint :Tue, Jun 25 2013. 12 00 PM IST
The Chennai-based company told BSE that the process has been initiated through State Bank of India
Orchid Chemicals and Pharmaceuticals Ltd has been referred to the corporate debt restructuring (CDR) cell of the Reserve Bank of India after liquidity constraints affected operations.
The Chennai-based company told BSE that the process has been initiated through State Bank of India. Promoter Raghavendra Raoholds a 32.28% stake in the company, of which about 87% has been pledged.
The company did not have sufficient cash flow even to meet working capital requirements, said Subrata Sarkar, an analyst at Dalmia Securities Pvt. Ltd.
“We have close to Rs.2,700 crore of debt,” said Rao, managing director.
“In a way it is good, at least the company gets to restructure its debt and get time on its interest payments,” said Sarabjit Kaur, an analyst with Angel Broking Ltd.
“The deal money from Hospira Inc. will enable us to reduce some debt,” said Rao without providing details.
In August 2012, Orchid said it had agreed to sell its active pharmaceutical ingredients business and research and development facility to US-based Hospira for $200 million as it was severely constrained by debt and working capital issues.
However, IDBI Bank Ltd approached the Madras high court seeking an order that Orchid settle its dues before the deal went through, which delayed the sale. With that issue being sorted out, the transaction is expected to be completed shortly, said Rao.
This is not the first time that Orchid has had debt troubles. The company sold its generic injectable formulation business to Hospira for Rs.1,800 crore after its debt more than doubled to Rs.2,985 crore in 2009-10 from Rs.1,029 crore in 2005-06.
Orchid repaid close to Rs.1,000 crore of debt and increased reserves by Rs.300 crore from the proceeds.
The company reported a loss of Rs.275 crore for the fiscal ended 31 March 2013, compared with a profit ofRs.103 crore the previous year.
“This is a temporary relief not a solution and Orchid had sold its lucrative business to Hospira earlier and this time there is no way out,” said Sarkar.
Orchid fell 0.89% to Rs.50.10 on Monday while the benchmark Sensex fell 1.24 % to 18,540.89 points
TNN | Jun 25, 2013, 05.55AM IST
Orchid Chemicals is seeking recourse with its lenders and consequently has made a reference to the corporate debt restricting (CDR) cell, a body constituted by RBI to ensure restructuring debt of an organization.
The company made a regulatory filing with the stock exchanges on Monday whereby it said, "due to continuing liquidity constraints and pressure on operations, Orchid has initiated the process of restructuring its debt and accordingly the company has made reference to the CDR Cell throughSBI." Orchid, it is learnt, has a total debt of nearly $500 million or around Rs 2,800 crore. Of this nearly $200 million would be paid to lenders when it receives funds for sale of some businesses to Hospira over the next few days. It received all no-objection certificates, including clearance from IDBI Bank for the agreed sale of various assets to Hospira Inc
The delay in concluding the August 2012 deal, under which Orchid was supposed to sell various assets, including active pharmaceutical ingredients business and a R&D facility to Hospira for $200 million, had resulted in a severe cash crunch.
The company made a regulatory filing with the stock exchanges on Monday whereby it said, "due to continuing liquidity constraints and pressure on operations, Orchid has initiated the process of restructuring its debt and accordingly the company has made reference to the CDR Cell throughSBI." Orchid, it is learnt, has a total debt of nearly $500 million or around Rs 2,800 crore. Of this nearly $200 million would be paid to lenders when it receives funds for sale of some businesses to Hospira over the next few days. It received all no-objection certificates, including clearance from IDBI Bank for the agreed sale of various assets to Hospira Inc
The delay in concluding the August 2012 deal, under which Orchid was supposed to sell various assets, including active pharmaceutical ingredients business and a R&D facility to Hospira for $200 million, had resulted in a severe cash crunch.
The deal was supposed to have been completed by March 2013, which now has a June 30 deadline.
Orchid which has nearly 20 lenders, through this CDR is seeking bank's support to restructure the $300 million residual debt.
Debt strapped and cash starved Orchid Chemicals incurred a massive net loss of Rs 132.27 crore for the quarter ended March 2013. The company had earned a net profit of Rs 20.55 crore in the corresponding quarter last year. Revenues during the quarter dropped 45.36% at Rs 268.15 crore from Rs 490.78 crore.
Orchid which has nearly 20 lenders, through this CDR is seeking bank's support to restructure the $300 million residual debt.
Debt strapped and cash starved Orchid Chemicals incurred a massive net loss of Rs 132.27 crore for the quarter ended March 2013. The company had earned a net profit of Rs 20.55 crore in the corresponding quarter last year. Revenues during the quarter dropped 45.36% at Rs 268.15 crore from Rs 490.78 crore.
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