Orchid Pharma RP hits roadblock as Ingen Capital fails to infuse funds

While the NCLT on Nov 2 has sought Ingen Capital to pay Rs 3.34 billion by Orchid Pharma - in 5 days, the investor has not infused any fund during that time

The resolution process of Orchid Pharma has hit a roadblock with the successful bidder, US-based Ingen Capital has failed to infuse any funds, even after orders from the National Company Law Tribunal (NCLT) to pay at least one-third of the amount it has to pay. While the NCLT on November 2 has sought Ingen Capital to pay Rs 3.34 billion, that is, one-third of the due payment to the financial creditors by Orchid Pharma - in five days, the investor has not infused any fund during that time, it said. 

The Committee of Creditors (CoC) has earlier selected the resolution plan of Ingen Capital which submitted to pay a total of around Rs 10.60 billion into the debt-ridden pharmaceutical firm, while the banks were expected to take a huge haircut from the total debt of over Rs 30 billion the company owe to them.

The resolution plan by Ingen Capital Group was approved by the NCLT on September 17 under the Insolvency and Bankruptcy Code, 2016. Ingen had to pay the amount in 30 days and settle the banks by that time. A consortium of 24 banks has lent a total of over Rs 32 billion to the drug maker.  

With a delay in receiving the fund, the Resolution Professional had approached NCLT, consequently, the tribunal passed an order on October 10, 2018 to constitute interim monitoring committee (iMC) with the officials of 5 lenders, stating that the RP shall discharge the functions of the company as per the instructions of the iMC until further orders, as Ingen did not infuse any money into the company, said an addendum to the Director Board's Report of the company's Annual Report for the year 2017-18.

The Resolution Professional later filed an application to the NCLT seeking direction to immediately deposit an amount of Rs 3.34 billion, which shall lie in escrow as security for the performance of the obligations of the investor in implementing the approved resolution plan. The NCLT observed that since the pharmaceutical company is a going concern and getting some inflows, the RP and the Monitoring Committee was in a position to run the company by making payment to more than 1000 employees of the company and also meeting other requirements of the company.   

Ingen Capital filed applications seeking replacement of the RP and modification of the order on October 10, apart from seeking more time to file the reply to the issue.  

"Again, NCLT passed another Order on November 02, 2018 directing Ingen to deposit within 5 days an amount of Rs 3.34 billion (representing 1/3rd of the payment due to financial creditors) into the Company Account. As of this date, Ingen is yet to comply with this Order," said the addendum, dated November 9, 2018. The NCLT has also ordered the RP the liberty to take up further course of action in accordance with law, if the amount is not remitted.

The Resolution Professional S V Ramkumar did not respond to repeated calls and messages. An email sent to Ingen Capital also did not elicit the response.

The NCLT had issued an order to appoint an IRP to take charge of the management of the pharmaceutical firm, with effect from August 17, 2017. The company said in a regulatory filing that the Order issued by the NCLT, Chennai Bench, admitted a petition filed by an operational creditor Lakshmi Vilas Bank. The company was among the 28 large corporate defaulters in RBI's second list, and which were referred to the NCLT.

The company had sold its generic injectables business to Hospira Healthcare, a US-based company that was later acquired by Pfizer, in 2009 for a consideration of $400 million (Rs 18.50 billion as per the then prevailing exchange rate). At the end of August 2012, the company announced the sale of its carbapenem and penicillin API manufacturing facility in Aurangabad along with the related R&D unit in Chennai and product pipeline to Hospira for a consideration of $200 million (around Rs 11.50 billion then).

The company is said to be the first export-oriented unit in the domestic pharmaceutical industry, post liberalisation. The company had a strong presence in cephalosporin antibiotic APIs, oral finished dosage formulations, generic injectables, carbapenem and penicillin formulations, and non-penicillin and non-cephalosporin medicines. In 2008 there were reports of a takeover threat from Ranbaxy Group, through its arm Solrex Pharmaceuticals.

According to the company's annual report, during the financial year 2017-18, it continued to reel under financial stress due to liquidity constraints, mounting interest burdens, which directly hit its net profits. As a result, the ability of the company to meet its repayment obligations /liabilities were adversely affected. Despite the tough liquidity and working capital constraints, it managed to sustain sales with a lower EBITDA denoting the basic strength of the business.