Orchid to seal deal with Hospira by month-end, says CMD

Last year was a tough one for Orchid Chemicals and Pharmaceuticals.

Apart from a huge debt and lower earnings, Orchid’s deal with Hospira (the company sold its penem and penicillin business to the American pharma major for $200 million) ran into a roadblock with bankers, over ‘non-fulfilment’ of loan conditions.

With Orchid now obtaining the necessary approvals, the company is banking on the money from the Hospira deal to wriggle out of the debt mess, at least partially.

Once the transaction is complete, Orchid wants to regroup by focusing on other existing business (antibiotics API and oral formulations), launching niche therapeutic products and reclaiming pledged promoter shares, says Chairman and Managing Director Raghavendra Rao. Excerpts:

Is the Hospira deal on track?

All issues are sorted out. We have obtained all the no-objection certificates. The deal will get over by June 30. We are under a debt of Rs 2,200 crore. We plan to repay Rs 800 crore out of the Hospira deal. The rest of the business will take care of the remaining debt as we go forward. We want to finish this deal first and then regroup ourselves.

We also have to reduce pledged promoter holding. Currently, promoter holding is 33 per cent, of which over 70 per cent is pledged. We had planned to reduce that last year but things have delayed on all fronts. This year, we plan to reduce it, starting from the end of this quarter. The goal is to bring it down to below 50 per cent in a quarter’s time.

Are you looking at any new segments?

We are looking at niche therapeutic products, in the areas of oncology and ophthalmology, where value addition is high and investment is low. This may entail a new manufacturing facility.

Are you hoping for a revival this year? (Orchid’s revenue in 2012-13 was down 28 per cent at Rs 1,269 crore, with a net loss of Rs 275 crore.)

Last year has not been a benchmark for our performance due to lack of working capital and funding. Our regular operations have suffered quite a bit. We are optimistic this year.

What we have hived off (penem/penicillin) is 23 per cent of our business. We think we will grow by 20-25 per cent this year; this will get us back to the same position. We want to exploit market opportunities in existing areas (cephalosporin (antibiotics) and non-cephalosporin active pharma ingredients, oral formulations and R&D). We are looking at new approvals and new products in non-antibiotic categories. There are many products coming off patents. The US, Japan and Europe will propel our growth this year.

Your comments on Ranbaxy and safety issues…?

It is a question of corporates adopting adequate practices. It is an operating issue, apparently known to the management also. The FDA has always been stringent. And let us not think it is hounding Indian companies. It has rapped the knuckles of many companies in China and Mexico, including multinationals. Orchid has an operations review, audit and scientific advisory committees to look into all issues.

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