Orchid still in bloom on takeover buzz

Orchid still in bloom on takeover buzz
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First Published: Thu, Apr 17 2008. 01 07 AM IST
Updated: Thu, Apr 17 2008. 01 07 AM IST
New Delhi: Shares of Orchid Chemicals and Pharmaceuticals Ltd rose 10.74% on Wednesday and almost 30% over the last two days on the Bombay Stock Exchange (BSE), on continuing speculation of a possible takeover attempt on the Chennai-based maker of antibiotic drugs.
The scrip ended the day at Rs319.05 per share, even as BSE’s benchmark index, the Sensex, remained almost flat at 16,244.19 points, gaining 0.56%.
Orchid’s shares also touched a 52-week high of Rs330 in intra-day trading on Wednesday. Merely three weeks ago, the shares had plummeted to a 52-week low of Rs106.50 each after the promoters’ stake in the company shrunk by 7.9% after two lenders from whom they had borrowed funds against equity decided to sell the pledged shares.
Prices have trebled since then, pushed up by news that a little known New Delhi-based company Solrex Pharmaceuticals Co. had started buying stake in Orchid through bulk deals in the open market.
Solrex, believed to be owned by the promoters of India’s largest drug maker Ranbaxy Laboratories Ltd, currently holds 14.72% in Orchid and is within sniffing distance of 15% — the level at which it will have to make an open offer to buy out Orchid’s public shareholders in keeping with the country’s laws.
Orchid spokesperson Ch. Ram said the company has so far not received any intimation of the stake being raised.
Ranbaxy’s spokesperson and its managing director, Malvinder M. Singh, have repeatedly refused to comment on the issue, but have said that the Gurgaon-based drug maker doesn’t believe in hostile takeovers.
A Mumbai-based analyst with an equity firm said there was a “lot of speculation pushing up the share value, but very little delivery”.
The Orchid spokesperson confirmed that huge volumes were being traded due to speculative buying and selling, but that average delivery levels hovered around 5-7%.
Ram, however, denied rumours that the Orchid management was in talks with either Solrex’s or Ranbaxy’s promoters.
According to Bloomberg data, almost 71.4 million Orchid shares were traded on both BSE and the National Stock Exchange on Wednesday, and 46.5 million shares the day before.
The delivery percentage— defined as the actual number of shares changing hands as a percentage of the total volume traded —for Orchid, was only 4.6%, according to information on BSE’s website.
Such a low number is usually sign of significant speculative activity.
The Orchid promoters, who own a little under 16% stake in the company and are hence vulnerable, are considering various options such as conversion of share warrants into equity and are in talks with institutional investors who, they have previously claimed, support them.
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First Published: Thu, Apr 17 2008. 01 07 AM IST