Mumbai: The Khorakiwala family, promoters of Wockhardt Ltd, has put up for sale the drug maker’s Bhandup factory and adjoining land in Mumbai, said a person close to the development.
The Khorakiwalas are selling the property to raise money to repay short-term loans and meet other liabilities.
Plant sale: Wockhardt chairman Habil Khorakiwala. Madhu Kapparath / Mint
“The company may also put its pharma marketing division called Merind, which sells two of its neuro-psychiatry products Libotryp and Tryptomer, on the block along with the manufacturing plant,” the person said, requesting anonymity.
Last month, the company transferred Rajesh Sharma, marketing head for its Merind division, to another business unit, a company official said, who declined being named. Sharma has not been replaced.
An email query to the firm was not replied to, and Wockhardt’s spokesperson said he “cannot make any comments now.”
The Bhandup plant, which makes vitamin B12, a key ingredient in many nutritional drugs and vitamin combinations, is one of the largest such facilities in India.
The plant and its land, which currently belong to key promoter Khorakiwala Holdings and Investments Ltd, was inherited by the Wockhardt group after it bought Merind Ltd for Rs95 crore from the Tata group in 1998.
In 2000, when Wockhardt was demerged into two companies—Wockhardt Ltd and Wockhardt Life Sciences Ltd—the pharmaceutical business of Merind was transferred to Wockhardt Ltd. The non-pharma businesses were consolidated under Wockhdardt Life Sciences, also owned by the Khorakiwala family. Since then, the Bhandup plant has been a contract manufacturer for Wockhardt Ltd.
The company may find it difficult to find a buyer given the current realty market downturn, real estate consultant Pranay Vakil said.
“In today’s real estate market, the builders actually look out for selling land instead of buying, though the deal in the context of a strategic buyer wanting to acquire a running plant is different,” Vakil said.
According to him, the land at LBS marg, where the Wockhardt plant is located, would sell for Rs5,000 per sq. ft. “But still, since (it is) an industrial land, which requires several clearances and standard omissions, (it) can’t fetch the valuation in the same count,” he said.
Another real estate consultant in Mumbai, who didn’t want to be identified, said the sale of the plant may face difficulties as only a strategic buyer would offer a reasonable value to it, but that the land could fetch expected price once the real estate market picks up.
Mint could not independently ascertain the quantum of land up for sale.
Wockhardt had recently mandated the Indian investment banking arm of Swiss bank UBS AG to help sell its assets.
Unable to find takers for recently acquired global assets, besides non-core assets in India, the mandate has been recently revised. Investment bankers say Khorakiwala is now looking for strategic sale in Wockhardt and the group may recast the firm by creating a new entity solely for domestic business.
Mint had reported in February that the company had recently borrowed around Rs320 crore from Infrastructure Leasing and Financial Services Ltd and IDBI Bank Ltd to repay all previous loans. Habil Fakhruddin Khorakiwala and his family, who own 75% in the company, have pledged 43.11% of their stake in return for the loans.
Wockhardt Ltd has $110 million worth of foreign currency bonds due for redemption in October. To meet this liability, along with other loans, the company requires between Rs1,000 and Rs1,300 crore. The firm’s total debt, according to rating agencies, is at least Rs3,000 crore and the debt to equity ratio, a key to a firm’s financial health, is relatively high at 3:1.
Wockhardt’s shares slumped almost 74% in 2008 and about 12% so far in 2009. The shares of the company are traded on stock exchanges in India and Luxembourg, while its bonds are traded in Hong Kong. The firm also posted heavy mark to market (MTM) losses on foreign currency loans and derivatives in 2008. MTM is an accounting practice of valuing a financial asset on its market value and not the cost at which it was bought.
Habil Khorakiwala had in an earlier interview said that his firm is not leveraged enough and can even borrow more as it has assets that have not been offered as collateral to any bank so far.