Mumbai: Pharma company Wockhardt Ltd is in talks to issue around Rs250 crore worth of non-convertible debentures (NCDs) to Life Insurance Corp. of India Ltd (LIC), as part of its efforts to raise Rs500 crore to repay its foreign debt, according to a person involved in the deal and didn’t wish to be identified for that reason. Wockhardt has also struck deals with a few other financial institutions to raise money, this person added, but declined to provide details.
Daryl S., a Wockhardt spokesman, said in an email that the company has no comments to offer on issuing NCDs. LIC managing director Thomas Mathew T. did not answer calls to his mobile phone over the weekend. Another LIC official, who didn’t want to be named as he’s not the insurer’s official spokesperson, said the firm has subscribed to many corporate NCDs but he could not give specific details.
Wockhardt has been exploring options to raise $150-200 million (Rs726-968 crore), mainly to repay liabilities arising out of the redemption of $110 million worth of foreign currency convertible bonds (FCCBs) due in October. These included stake sales to private equity (PE) firms and strategic partners as well as selling key assets. But Wockhardt’s talks with PE firms hit some roadblocks over issues related to valuation, as Mint reported in November.
Diversifying investments: The Life Insurance Corp. building in New Delhi. The public sector corporation has stepped up investments in non-convertible debentures and other debt instruments. Rajeev Dabral / Mint
The drug maker issued the FCCBs in 2004 at a conversion price of Rs486 per share and has to pay $142.5 million when they become due in October. But it needs the extra money to make up for the fall in its stock since the bonds were issued. On Monday, its shares closed nearly flat at Rs118.10 each on the Bombay Stock Exchange (BSE), while the exchange’s benchmark Sensex index closed about 3% higher.
The company’s current debt is about Rs2,900 crore, compared with an equity base of Rs1,274 crore, translating into a debt-equity ratio of 2.28:1, making further debt financing harder to come by in a market already squeezed for credit.
Several Indian companies that have raised funds through FCCBs have opted to borrow from domestic banks after the Reserve Bank of India decided to allow local companies to buy back FCCBs, but Wockhardt’s high debt-equity ratio may not allow it to opt for this route, say sector analysts.
Wockhardt last month informed exchanges of a proposal to issue preferrential shares to raise Rs500 crore to repay debt and fund expansions.
As for LIC, the public sector corporation has stepped up investments in NCDs and other debt instruments such as commercial paper and certificates of deposits at a time when companies are finding it tough to raise funds. In December, LIC had said it would invest Rs15,000-20,000 crore in NCDs in 2008-09.