The Hindu Business Line : Orchid silent on Ranbaxy interest, but scrip active

Mumbai, April 11 Despite the silence from Orchid Chemicals and Pharmaceuticals on the interest shown in it by Ranbaxy Laboratories, the buzz remained around the Chennai-based drug company.

Orchid scrip closed on Friday, up over eight per cent at Rs 247.30, but this was after it peaked to close to 13 per cent during the day, touching a high of Rs 260. And in a market already hungry for some development regarding Orchid, the spike in share price fuelled further curiosity on whether indeed Orchid had agreed to a pact with Ranbaxy or if Orchid’s promoter had managed to bring in funds from another investor.

Promoter warrants

The promoter has 50 lakh warrants and would require about Rs 90 crore to exercise them. While there is time for the warrant conversion till August 31, exercising the option would translate into an additional equity of 7.6 per cent. At present, the promoter holds 17 per cent equity.

Orchid’s founder, Mr K. Raghavendra Rao, however, did not want to comment on the day’s developments. Some of his peers in the industry, especially those heading entrepreneur-run drug companies, seemed to cast their lot with Mr Rao. Knowing Orchid’s promoter, it is unlikely he would want to get into a deal with either, quipped the head of a drug company, indicating that Mr Rao will be keen to steer Orchid further, possibly using resources raised from existing investors or funds showing interest in the company.

Solrex factor

But Mr Ranjit Kapadia, Research-head of PCG-Prabhudas Lilladher, observed that the situation will boil down to who blinks first, if Solrex (a Ranbaxy group company) picks up more equity in Orchid. Solrex has already picked up over 11 per cent equity in Orchid. If Solrex’s equity goes up to 14.99 per cent, Ranbaxy gets close to triggering an open offer, mandatory when it touches the 15 per cent mark. Orchid will have to look at other options if it wants to keep that from happening, he said.

Orchid’s travails started with its promoter reportedly losing about Rs 75 crore in a margin-call-related sell-off last month that reduced the promoter stake to 15.8 per cent. Subsequently, Solrex emerged on the scene and picked up equity in Orchid. In the recent past, Ranbaxy has picked up equity in Zenotech Laboratories Ltd, Krebs Biochemicals & Industries Ltd and Jupiter Bioscience Ltd, respectively