The Hindu Business Line : Orchid Chem raises $200 m through FCCBs

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Chennai Feb 13 Orchid Chemicals and Pharmaceuticals today announced that it has raised $200 million (Rs 900 crore) through an issue of zero coupon foreign currency convertible bonds. These bonds convert into shares at a premium of Rs 348.34, which is 30 per cent more than the company's share's closing price of Rs 267.95 on the NSE.

Speaking to Business Line about this, the Orchid Chemicals' Deputy Managing Director, Dr C.B. Rao, said the investors had taken due note of the fact that ten new products would be launched in the next few months and that the company had in the recent times got a toehold in the high-margin, regulated markets of the US and Europe.

The immediate consequence of the inflow of funds would be seen in lower finance charges, as the company intends to use the funds primarily to pay off high cost debt. Finance charges amounted to Rs 74 crore in the nine-month period upto December and Rs 87 crore in the full year 2005-06.

When fully converted, the bonds will add an estimated 25 million shares to the existing 65.81 million shares of the company — an addition of about 40 per cent.

Back of the envelope calculations show that the expansion of equity could be EPS-accretive. Add back the interest charges of Rs 74 crore to the net profit of Rs 72 crore and divide the sum by the expanded equity, EPS works out to Rs 16 against Rs 11 otherwise. This, however, assumes that inflow of funds would fully extinguish all financial costs.

The decision to raise $200 million through an FCCB issue was taken back in May 2006, but was deferred after the market-meltdown resulted in a crash of Orchid's share price from a high of Rs 399 to a low of Rs 142 on the NSE.

Today, the Orchid share closed at Rs 241.80, down Rs 26.15 from the previous closing price.

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