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Orchid Pharma scrip moves up smartly with entry of new management

Sanjay Pingle, Mumbai
Wednesday, March 31, 2021, 08:00 Hrs  [IST]

Orchid Pharma, a Rs. 500 crore plus pharma major, has suffered heavy financial setback and was reeling under financial stress for the last couple of years. It has undertaken major financial and management restructuring process. The new management of Gurgaon-based biotechnology player Dhanuka Laboratories Ltd (DLL), has taken over the company on the last day of financial year 2019-20 as per the resolution plan approved by National Company Law Tribunal (NCLT) and the Supreme Court. Currently, DLL is holding 98 per cent equity stake of Orchid Pharma and it became a subsidiary of DLL.

The new management has infused funds and started taking measures to improve working. The board of directors has been reconstituted with nominees of DLL and powers of the board have been reinstated in the company. The new promoters are taking steps to comply with the requirement of equity holding to 75 per cent within stipulated time of three years. Ram Gopal Agarwal has taken over as chairman and Manish Dhanuka as managing director after taking over the company.

With change in management, Orchid scrip, which was suspended on stock exchanges, started moving upward in every trading session from its yearly low of Rs. 18 to current high at Rs. 2347.80 on BSE. Orchid scrip touched to yearly high level on March 26, 2021 from its yearly lowest level of Rs. 18 on November 2, 2020. Current market capitalisation worked out to Rs. 9,127 crore. Orchid Pharma is not included in BSE Healthcare index. BSE Healthcare index of 69 pharma companies moved up to yearly highest level at 22,464 points and Sensex reached at its highest level at 52,516.76.

For the first nine months ended December 2020 under new management, Orchid Pharma has posted lower revenue of Rs. 330 crore as compared to Rs. 397 crore in the corresponding period of last year. Covid-19 pandemic and lock down put pressure on operations. The net loss remained at Rs. 92 crore. After reduction of equity capital from Rs. 88.96 crore to Rs. 40.82 crore, EPS worked out to negative Rs 22.49 for the first nine months of 2020-21 as against negative Rs 10.36 in the same period of last year. The corporate action for reduction & consolidation of equity capital was executed during October 2020.

The company was facing financial problems for nearly five years as its revenues declined significantly due to higher interest payment. Its consolidated sales declined sharply from Rs 879 crore in 2015-16 to Rs 503 crore. It incurred net loss of Rs 274 crore in 2015-16 and increased to Rs. 495 crore in 2016-17. In 2019-20 its net loss was at Rs 131 crrore. Its borrowings were at Rs. 2,378 crore as at the end of March 2016 and reduced to Rs. 501 crore under the new management as at the end of March 2020.

Orchid Pharma was under the Corporate Insolvency Resolution Process (CIRP) with effect from 17.08.2017, the powers of the Board stood suspended and the management of the Company vested with the Resolution Professional. Orchid Pharma is one of the leading pharmaceutical companies in India head quartered in Chennai and involved in the development, manufacture and marketing of diverse bulk actives, formulations and nutraceuticals with exports spanning over 40 countries. Orchid's world-class manufacturing infrastructure include US FDA compliant API and finished dosage form facilities near Chennai, Tamil Nadu in India.

The company is now focusing to increase the sale and distribution of its cephalosporin and the non-penicillin, non- cephalosporin in generics form in regulated markets including United States, Canada, Europe, Japan and Australia. Orchid has set up five subsidiaries to spread its presence in UK, US and other regions. It commenced activities to manufactures APIs as 100 per cent export orient unit during February 1994 and produce formulations for domestic and export market with the help of own R&D activities.

For the full year ended March 2020, Orchid Pharma’s revenue declined to Rs. 508 crore from Rs. 600 crore in the previous year. Its exports worked out to Rs 447.37 crore from Rs. 496.67 crore and domestic sales were at Rs 42 crore as against Rs. 56 crore. Thus, the company established strong presence in export market. The net loss for the year 2019-20 remained at Rs. 131 crore. With the entry of new management, the reserves & surplus went up to Rs. 983 crore from negative amount of Rs. 793 crore. Total borrowings reduced to Rs. 501 crore from Rs. 1,425 crore. This financial improvement push Orchid scrip to new high every trading session and now moving around Rs. 2,200 crore on BSE.

The company has set up five subsidiaries viz., Bexel Pharmaceuticals Inc., USA, Orchid Europe Ltd, UK, Orchid Pharmaceuticals Inc, USA, Orchid Pharmaceuticals SA (Proprietary) Ltd, South Africa and Diakron Pharmaceuticals Inc, USA. During the year ended March 31, 2020, the Group has issued 14,300 zero per cent optionally convertible debentures (OCD) of Rs.1,00,000 each.

Once again the situation is changing rapidly due to second wave of Covid-19 and giving rise to uncertainty. The new management will continue to closely monitor any material changes arising of future economic conditions an impact on its business.

The current management is also managing leading listed and debt free agrochemical company Dhanuka Agritech Ltd (DAL) with sales of Rs. 1,120 crore during 2019-20 and net profit of Rs. 141 crore. Directors have paid interim dividend of 600 per cent i.e. Rs. 12/- per equity share for each equity share having a face value of Rs. 2/- each for the FY 2019-20. Dhanuka continues to remain debt-free, due to robust financial management. Additionally, it has a healthy net worth of Rs. 707.70 crore as on 31st March, 2020.

Considering the past financial track record of the new management, it will able to turn loss making Orchid Pharma into profit making corporate entity in short period. As at the end of March 2020, Orchid's cumulative Abbreviated New Drug Application (ANDA) approvals for the US market stood at 40. This includes 8 Para IV FTF (First-To-File) flings. The break-up of the total ANDA approvals is 11 in cephalosporins segment and 29 in NPNC space. In the API domain, Orchid's cumulative flings of US DMF stand at 76. This will help company to improve its exports in near future.

Orchid Pharma : Financial highlights
           
(Rs crore) 2019-20 2018-19 2017-18 2016-17 2015-16
           
Revenue/sales 508.04 599.98 687.82 807.43 879.34
Net Profit -131.37 69.41 -352.77 -495.43 -274.27
Interest 4.16 0.29 301.65 336.26 294.23
R&D 9.86 13.96 17.73 35.23 28.83
Exports 447.37 496.67 613.16 712.29 586.59
Borrowings 501.47 1424.61 1893.91 2156.78 2377.54
Equity capital 40.82 88.96 88.96 88.96 88.96
Reserves 983.54 -793.00 -880.72 -556.71 -112.51
EPS (Rs) -14.75 7.80 -39.65 -55.69 -31.51
           
Current share price 2236.00 March 26, 2021      
Yearly High  2236.00 March 26, 2021      
Yearly Low 18.00 Nov. 3, 2020      

 

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