Wockhardt plans preferential allotment to raise Rs 500 cr

Drug major Wockhardt, which is trying to raise funds for meeting payments to its foreign currency convertible bond (FCCB) holders, today said the company was planning to raise Rs 500 crore through preferential allotment of shares.

Following the announcement, share prices of Wockhardt rose 3.02 per cent on the Bombay Stock Exchange (BSE) from Rs 104.20 to close at Rs 107.35 today. Wockhardt said the issue would be for redeemable preference shares of face value of Rs 5 each.

An extraordinary general meeting (EGM) of the members of the company has been convened on January 19, to consider and approve the plan. The meeting will also consider increasing the authorised share capital from Rs 125 crore to Rs 175 crore by the creation of 10 crore preferential shares, the company informed the stock exchanges today.

Wockhardt declined to share more details on the preferential share issue. “The strategy will be to reduce their debt-equity ratio so that an increase in authorised share capital will give room for more borrowing,” said Ranjit Kapadia, head of pharma research, Prabhudas Liladhar.

Currently, the debt on its books is almost twice that of its equity, at close to about Rs 2,900 crore, sources said. Wockhardt has to repay FCCBs worth about $150 million, which will mature by October 2009. It is reportedly attempting to sell off some of its assets such as its Ireland arm Pinewood Laboratories to raise funds for repaying the FCCBs.

In a separate regulatory filing today, the pharma firm said the company as a policy would not comment on market speculations. However, Wockhardt said appropriate disclosures would be made, in case the company plans to divest the subsidiaries and enters into definitive agreement.