Orchid Chemical announced that it has bought back bonds worth $25.7 million out of the total outstanding FCCB of $194.7 million as on date, and was in the process of extinguishing the same.
The funding has been done through ECB. Post this transaction, the company would have FCCBs worth around $ 169 million, of which, $19.7 million is payable in FY2011 and US $149.3 million in FY2012.
The company intends to purchase additional bonds from the market and extinguish them from time to time. We believe the transaction per se will not materially alter the company’s current Debt/Equity ratio of 3x.
We maintain a BUY on the stock, with a target price of Rs128 as the stock continues to trade at 11.8x FY2009E and 3.9x FY2010E adjusted earnings.
We believe launch of Piperacilin-Tazobactum in Europe would be a key positive trigger for the stock in the near term.