Wockhardt may go slow on asset sale plan

Drug major Wockhardt is likely to go slow on its plans to divest non-core assets, including the proposed stake sale of its hospital chain, since the Corporate Debt Restructuring (CDR) package approved by its lenders has taken care of the company’s immediate financial commitments.

Sources said the company had already secured the required funds for payments due during the current year and might wait for higher valuations for assets that were on the block. Under the CDR, Wockhardt has to divest its non-core assets at an estimated value of Rs 790 crore, but the company has been given six years to complete the transaction.

Wockhardt has already mobilised close to Rs 300 crore from the recent sale of its loss-making German subsidiary Esparma to Mova GmbH and the animal health division to Vétoquinol, a French veterinary care company.

THE COMPANY was also looking at divesting some of its brands in the consumer health division, a 32-acre dairy and milk processing unit in Punjab which the company inherited from its acquisition of Dumex India and part of the 250 acres of land in Aurangabad, sources said. Wockhardt’s promoter Habil Khorakiwala was also planning to divest less than 26 per cent stake in Wockhardt Hospitals, which has 12 hospitals for a valuation of Rs 800 crore to Rs 1200 crore.

“My current financial crisis will be over if the CDR package goes through,” Habil Khorakiwala, chairman of Wockhardt had told Business Standard in an interview in April.

A source said talks on the stake sale of Wockhardt Hospitals to Fortis Healthcare has not progressed in the last one or two months. Vishal Bali, chief executive of Wockhardt Hospitals, and a Wockhardt spokesperson declined to comment. “I will not comment on any of our acquisitions until I sign the cheque,” Shivinder Mohan Singh, managing director of Fortis Healthcare, told Business Standard.

“With the CDR going through, the short-term funding requirements of Wockhardt has been met. The base business of Wockhardt is good and the company can generate internal income to repay the long term loans to get out of the debt-burden,” said Ranjit Kapadia, HDFC Securities’ vice-president for institutional research.

The company had to repay Foreign Currency Convertible Bonds (FCCB)s worth $110 million, which were due for redemption in October, and external commercial borrowings of $250 million. Wockhardt’s auditor, Batliboi, had said the company would have to repay loans and related liabilities worth Rs 1, 414.4 crore before the end of 2009 if the CDR fails to go through.

The company has also restructured the payment of its FCCBs. The two options under the CDR allows the company to buy back the bonds only if (i) the bond-holders offer an average discount in excess of 65 per cent of the redemption value of the bond or (ii) 50 per cent of the preference shares will be optionally convertible to equity after October 25, 2015, at the then applicable Sebi formula. The remaining 50 per cent will be given cumulative dividend and redeemed at a premium of 38 per cent, on December 31, 2018. Sources said Wockhardt was not looking at selling its profit-making overseas subsidiaries such as Negma Laboratories of France, Pinewood Laboratories in Ireland and Morton Grove in the US.

 

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