Sicom Plans Writ To Wind Up Sol Pharma

Sicom is planning to file a petition for the winding up of Hyderabad based SOL Pharma. The loss making company has been unable to pay even the interest on the Rs 5 crore loan extended by Sicom.

Sicom has put on sale its entire stake of close to nine per cent, in the Rs 197 crore SOL Pharma. The 1.1 million shares, accounted for 8.65 per cent of the companys 12.7 crore equity base and were collateral to the Rs 5 crore loan extended to SOL Pharma, said Sicom sources. The Sicom nominee on the board is expected to quit his post.

 

Industry sources were sceptical of Sicom is being able to find buyers for the nine per cent holding unless Dr Reddys shows interest. Dr Reddys had earlier picked up an eight per cent stake in the company.

However, Sicom sources said that Dr Reddys has not bid for Sicoms stake in SOL Pharma so far. No prospective buyers have approached us as yet,said Sicom sources. The shares had been purchased at Rs 70.

SBI Caps is working on a restructuring package for the company and is expected to finalise the details within the next 15-30 days.

SBI, alongwith Canara Bank, Allahabad Bank and Indian Bank, had given the company a Rs 90 crore loan to meet working capital requirements.

Sources said that financial institutions could resort to any of the three courses of action. The first being giving concessions like waiver of penalty, reducing interest rates and re-working the payment schedule.

They could ask the company to sell a part of assets and business lines and third, effect a change in the companys management.

They also said it is quite likely for the financial institutions to demand a change in management. The FIs had earlier restrained the company from paying a dividend.

SOL Pharma has been facing severe liquidity problems. Despite posting a profit of Rs 17.12 crore last year, 50 per cent of its Rs 102.37 crore net worth has been eroded with a net loss of Rs 67.02 crore incurred for the 18 months ended September 30.

The management had reportedly resorted to sacking employees, while offering them a VRS. The other steps taken to rectify the situation were selling off two brands, Riflux and Clamp to Dr Reddys Labs and licensing some others. In fact, Dr Reddys interest in the company was due to SOL Pharmas formulations business.

SOL had also to close down three units for a part of the previous year and suspend manufacturing of semi-synthetic penicillin, which contribute 30 per cent to turnover, due to uneconomical margins. Besides, the company decided to concentrate on manufacturing high margin bulk drugs to improve returns. Long term supply contracts like the one with Teva Pharmaceutical Industries was also a part of a plan.