Mumbai: Chennai-based drug maker Orchid Chemicals and Pharmaceuticals Ltd said on Monday that it has received approval from banks to raise $100 million through external commercial borrowings (ECBs) for redeeming $117 million of foreign currency convertible bonds (FCCBs), along with the yield to maturity, due in February 2012.
“We are fully geared to redeem the maturing FCCBs. The ECB sanction that we have received, coupled with our internal accruals, will enable us to comfortably redeem the outstanding bonds on the due date,” said chairman and managing director K. Raghavendra Rao.
While the company will use the $100 million it plans to raise for bond redemption, the remaining $ 17 million will be paid from its internal accruals in dollars.
The rupee depreciation will not affect the company, according to Rao. The rupee has dropped 15% this year.
“With over 85% of Orchid’s sales being exports billed in US dollar, the company has a natural hedge against currency fluctuations,” said Rao. Out of its $400 million revenue last fiscal, only 15 % was contributed by the local market.
Orchid share fell 8.02% to close at Rs 124.4 on BSE on Monday; the benchmark Sensex fell 0.72% to close at 15,379.34 points.
One should discount market sentiments in this context, says Sarabjit Kaur, a pharma analyst with Angel Broking Ltd.
“This (redemption of FCCBs) is a positive development for Orchid because there were some apprehensions that they would not be able to service the debt,” she said.
In 2007 Orchid had raised $175 million through FCCBs to repay some of its foreign currency loans and also fund its capital expenditure plans. The bonds, which were to mature after five years, were convertible into equity at a price of Rs.348.34. Bonds valued at $58 million have already been bought back or converted.
Analysts were apprehensive that Orchid may default on the repayment of bonds given the unsteady cash flows from the company’s business after it sold its injectibles unit last year. US-based generic injectable pharmaceutical company Hospira Inc. had purchased Orchid’s injectibles business for around $400 million in May 2010.