Orchid expects liquidity crunch to be over with CDR

Expansion of facilities, which was under the plans earlier has also been put on hold for the time being: CMD

Orchid Chemicals and Pharmaceuticals Limited is expecting its business to improve with the corporate debt restructuring (CDR) process getting completed in the next few weeks. The company, which has been facing challenges due to liquidity crunch, working capital and high interest flow, is looking at the completion of the CDR and the deal worth around $200 million with Hospira Inc to improve its operations.

R Raghavendra Rao, chairman and managing director of Orchid Pharma, said that while variables like the completion of the CDR were not under the control of the company, it was expecting the process to be completed in the next few weeks. Meanwhile, the company would only be looking at the deal inflow from the proposed sales deal with Hospira Healthcare as the way to see funds coming into the company.

The expansion of facilities, which was under its plans earlier, has been put on hold for the time being, considering the working capital was already under pressure.

“Once the CDR is completed and the deal is over, the situation will improve and then we can look at the expansion,” Rao said.

The company had signed a business transfer agreement (BTA) with Hospira in August 2012 for the sale and transfer of its Pencillin Penem API (active pharmaceutical ingredients) business and the API facility located in Aurangabad, Maharashtra, together with an associated process R&D infrastructure located in Chennai. The deal value is estimated to be $200 million.

The higher interest inflow is  another factor affecting the results. Meanwhile, the interest outflow during the quarter ended September 30, 2013, stood at Rs 120.88 crore as compared to Rs 76.47 crore a year ago, as reported earlier.

It reported a net loss of Rs 200.34 crore during the September quarter as compared to Rs 19.94 crore during the same period last year.