Wockhardt falls most in five months on seeking debt recast

Wockhardt falls most in five months on seeking debt recast
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First Published: Wed, Apr 01 2009. 10 42 PM IST
Updated: Wed, Apr 01 2009. 10 42 PM IST
New Delhi: Pharma company Wockhardt Ltd had the biggest drop in five months in Mumbai trading after the drug maker sought to restructure its debt, citing liquidity constraints and adverse market conditions.
Wockhardt declined 11% to Rs75.65, its biggest drop since 29 October, having plunged as much as 22% earlier in the day. The Mumbai-based company and lender ICICI Bank Ltd have approached the Corporate Debt Restructuring Cell, a voluntary organization backed by the central bank that assists lenders and borrowers.
Chairman Habil Khorakiwala, who stepped down as managing director on Tuesday, is seeking to raise funds to repay debt that has ballooned to four times its current market value. Wockhardt may have to offload assets or find a partner to inject funds.
“Their best option to tide over the current crisis is to bring in a strategic investor or sell part of their business,” said Rahul Sharma, an analyst at Karvy Stock Broking Ltd in Mumbai, who put the stock’s outperformer rating under review after Tuesday’s announcement. Their cost of borrowing is also likely to go up and impact the bottom line.
Wockhardt had net debt of about Rs3,400 crore in the year ended 31 December, pegging the company’s debt-to-equity ratio at 2.3 times, it said on its website.
About $150 million (Rs765 crore) of the company’s debt will be due for repayment in the current year, Morgan Stanley estimated in a note to clients on 3 March. The brokerage has since discontinued coverage of the stock.
The company will face short-term liquidity constraints as foreign currency convertible bonds become due for redemption, Sharma said.
Wockhardt postponed its earnings announcement for the year ended 31 December from Tuesday until the auditing of its accounts is completed by 25 April.
The founders of Wockhardt have pledged about 54% of outstanding stock with lenders, according to a company filing to the Bombay Stock Exchange. The stock under pledge accounts for about 85% of the shares owned by Khorakiwala Holdings and Investments Pvt. Ltd.
Murtaza H. Khorakiwala, son of the chairman, took over as the managing director on Tuesday. Murtaza, who joined Wockhardt in 2000, has a degree in medicine and a management degree from the US, the company said on Wednesday.
The company is trying to sell some assets including a factory and adjoining land and parts of its business to repay loans, Mint reported on 12 March, citing a person familiar with the development.
Fortis Healthcare Ltd may buy 74% of Wockhardt Hospitals Ltd for as much Rs750 crore, The Economic Times reported on Tuesday.
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First Published: Wed, Apr 01 2009. 10 42 PM IST