Wockhardt divested to infuse cash for its pharma chain

The sale of 10 key properties will overnight turn Habil Khorakiwala-promoted Wockhardt Hospitals from being among the top four healthcare chains in India to a minnow. But it will also give the promoters the much-needed cash to keep the lenders to Wockhardt Ltd, the home-grown pharma company, at bay. Besides helping rejuvenate the hospital business.

The sale of the 10 hospital properties to Fortis Healthcare will help Khorakiwala repay the Rs 500 crore debt on Wockhardt Hospital’s books. These 10, with a turnover of Rs 313 crore in 2008-09, were contributing close to 85 per cent of the chain’s total revenues, said sources.

At present Apollo, Fortis, Wockhardt and the Manipal Group are the leading hospital chains in India.

In early 2008, as the stock markets fell and Reliance Power sucked out liquidity, the fortunes of the Wockhardt Group faced a sudden reversal, as it was forced to drop the proposed Rs 800-crore initial public offer (IPO) for Wockhardt Hospitals. Khorakiwala and his family had borrowed heavily, pledging the hospitals and other assets such as the corporate office in Mumbai’s Bandra-Kurla Complex, mainly to fund expansion plans of the hospital chain.

The mark-to-market losses on the forex transactions undertaken by Wockhardt to fund overseas operations and the global financial crisis added to the troubles. By the end of December, pharma maker Wockhardt’s debt rose to over Rs 3,400 crore.

The lenders, led by ICICI Bank, recently approved a loan restructuring package for Wockhardt. Under this, it had to sell all non-core businesses at an estimated value of Rs 790 crore through divestment in six years, to repay the priority loans. In return for a year’s moratorium on loan repayment, the lenders also got the promoters to invest another Rs 70 crore into the company.

So far, Wockhardt has sold its losing German subsidiary, Esparma, to Mova GmbH and the animal health division to Vétoquinol, a French veterinary care company, to raise close to Rs 300 crore. And Wockhardt recently raised another Rs 625 crore through the sale of its nutrition business to Abbot.

If the bankers had not approved the CDR package, Wockhardt would have had to pay loans and related liabilities worth Rs 1,414.4 crore before the end of 2009, according to its auditor, Batliboi and Co.

A series of acquisitions in 2006 and 2007 had helped Wockhardt become one of India’s top drug makers. In October 2006, it acquired Ireland-based Pinewood Laboratories for $150 million to enter Ireland and to leverage Pinewood’s marketing network in Europe.

In another five months, it acquired Negma Laboratories for $265 million to enter the French market and to access its portfolio of 172 patents and distribution network. In November 2007, the company paid another $38 million to buy Morton Grove Pharmaceuticals in the US, to quickly broaden its portfolio in the US market, by adding another 31 products.