The promoters of Orchid Pharma have approved the issuance of shares to promoters on a preferential basis in order to fulfill corporate debt restructuring (CDR) requirements.
Chairman and managing director, K Raghavendra Rao, says the promoters holding will now increase to 43 percent and about Rs 681 crore debt has been repaid to banks.
"We now have a working capital of Rs 479 crore," adds Rao whose company has reduced net debt to Rs 2300 crore versus Rs 3500 crore earlier.
Below is the verbatim transcript of K Raghavendra Rao's interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy
Sonia: If you can just take us through the key takeaways from that board meeting and the fact that the promoters are going to raise their stake?
A: As far as the corporate debt restructuring is concerned, promoters have to bring in approximately Rs 74 crore which is what I brought in and against that price the new shares will be issued from the company which will increase my state by around 12 percent or so. So on enhanced capital I would have about 42 percent of the company so that is what it is.
Latha: So the entire increase in stake is entirely because of you adhering to the conditions of the CDR?
A: Yes that is right as part of the CDR mechanism I have to bring in the promoter contribution which I did and against which shares are being issued at Sebi price. So that will increase stake to around 43 percent of the new capital of the company.
Latha: Did you have to pledge any of your existing stakes to raise this money personally?
A: No.
Sonia: Do you have any plans as far as reduction of debt and how much do you plan to bring it down by from the Rs 3,500 crore?
A: As part of the restructuring program Rs 681 crore of debt has been repaid to the banks last week from the deal that we did with Hospira. We also have Rs 479 crore of cash on hand for working capital and for the growth of the company. So net debt now is less than Rs 2300 crore so we should be able to perform well in the next couple of years and collect enough cash to keep repairing the debt and go along.
Latha: Can you give us an idea of how sales will pan out, what is the likely sales numbers you are looking at for current year and next?
A: It is too early to say now because working capital ramp-up is what is beginning to happen. Because of the cash constraint only we went through the CDR as well as the deal. So at full capacity and ramp-up I think in the next 12 months or so we should be able to come to around Rs 1500 crore in terms of sales because not only the surplus but we also have the non antibiotic API and formulations business with us.
What has been hived off is only the Carbapenems and penicillin injectable business but the other businesses are with us so we should be able to come back to about Rs 1500 crore of sales in the next 12 months.
Sonia: Since your net debt has come down considerably now to Rs 2300 crore, how much do you think the interest cost run rate could be brought down to from this Rs 100 crore that you have been paying every quarter? Therefore how would EBITDA look?
A: In the recast package the interest rate is around 11 percent so that is how debt will be costing us, 11 percent per annum. We had to give ourselves some time before we get to the debt-EBITDA calculation because I have to look at the full capacity utilization and the run rate which is possible to come to around Rs 300-350 crore of EBITDA is what is possible in the next one year or so. So once they achieve those kinds of numbers and free cash again goes to pare down debt, the debt-EBITDA calculation can be done at that time.
Orchid Chemical stock price
On July 15, 2014, at 14:13 hrs Orchid Chemicals and Pharmaceuticals was quoting at Rs 83.80, up Rs 10.75, or 14.72 percent. The 52-week high of the share was Rs 84.80 and the 52-week low was Rs 35.00.
The latest book value of the company is Rs 69.29 per share. At current value, the price-to-book value of the company was 1.21.
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