Orchid Chemicals and Pharmaceuticals (Orchid) will raise overseas debt to retire the $175 million (Rs858 crore) foreign currency convertible bonds (FCCBs).
A resolution passed by the company’s Board recently allowed it to raise up to Rs1,500 crore, for which shareholder approval is expected to be sought soon.
The company’s FCCBs are currently being traded at a significant discount and are set to mature in February 2012 at a strike price of Rs348 for conversion to Equity.
The current yield-to-maturity is 7.25%. This move takes advantage of the recent liberalised norms that permit companies to use proceeds from overseas debt to retire FCCBs.
The company did not confirm about the price at which the bonds would be bought back. We maintain a BUY on the stock, with a target price of Rs128.