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Wockhardt eyes overseas funds

P B Jayakumar & Nevin John  |  Mumbai 

Indian drug major Wockhardt may resort to fresh borrowing overseas to repay holders of foreign currency convertible bonds (FCCB) as its attempt to sell assets have failed to generate interest among buyers.

The Mumbai-based drug maker is considering raising fresh bonds to repay earlier FCCB holders and also sale of assets, sources said. The company is no longer exploring raising debt overseas because the debt on its books is almost twice that of its equity, they said.

Wockhardt's $140 million (Rs 665 crore) FCCB will mature on October 25, 2009. The conversion price was originally set at Rs 486 a share, while Wockhardt's share price in today's trading ended at Rs 102.15. Wockhardt's attempt to sell its Ireland-based subsidiary is not progressing much as buyers aren't willing to pay the premium the Indian company is seeking, bankers said.

Wockhardt is in talks to sell Pinewood Laboratories either partially or fully for about $120-150 million (Rs 520-710 crore), but suitors are averse to the offer, they said. "The valuation of Pinewood should be less than $100 million in the current situation and it is difficult to find buyers in the West," they said.

"Wockhardt had tried stake sale to private equity funds, but valuation was an issue. Now they are trying to raise funds by selling some domestic assets such as about 250 acres in Aurangabad and sale of Pinewood," said another source. Wockhardt declined to comment on the fund-raising plans and asset sales. "This information is highly speculative," a company spokesperson said.

Pinewood, the largest generic company in Ireland, had revenues of EURO 62 million in 2007, with a revenue growth of 15 per cent over the previous year. Wockhardt, which bought the company in 2006 for Rs 686 crore, integrated the company into its group and recently implemented an integrated IT infrastructure. Wockhardt is the largest Indian drug company operating in Europe with above $400 million annual revenues and has manufacturing facilities in the UK, Ireland and in France, through acquisition of Negma Laboratories in 2007.

Analysts noted that Wockhardt, which had good cash surplus in recent years, exhausted the money through in-licensing about 10 products and on repaying the debt on Pinewood, Negma and Morton Grove acquisitions in the last two years. Wockhardt, which posted revenues of $673 million in FY07, currently has a debt burden close to Rs 2,900 crore, said sources.

First Published: Thu, December 18 2008. 00:00 IST