The Chennai Bench of Company Law Board (CLB) has reserved orders on a petition and the related disputes between billionaire investor Cyrus Poonawalla and his affiliated firms and Orchid Chemicals and Pharmaceuticals Ltd, a pharma company in which the former has acquired around 14 per cent stake over a period of time.
The billionare investor and his firms includuing biotech firm Serum Institute, has filed a Company Petition before the CLB, Chennai alleging certain acts of oppression and mismanagement in the affairs of Orchid Pharma and a Company Application seeking temporary injuction to restrain the company from implementing the Corporate Debt Restructuring (CDR) proposal duly accepted by the CDR Empowered Group, till the disposal of the Company Petition.
According to the counsels appeared for the argument today, the investors have also requested the CLB to set aside the Business Transfer Agreement (BTA) between Orchid Chemicals and Pharmaceuticals Ltd and Hospira Health care (India) Pvt Ltd to buy the formers' facility in Aurangabad and affiliated facilities for over $200 million (which later increased to $218 million), alleging that the valuations fixed for the transaction are false. They requested the Board to appoint an independent auditor to assess the value of the assets under transaction as per the BTA, to get a proper valuation.
The counsel appeared for Orchid Pharma contested the allegations stating that the investor has earlier given its approval to the BTA during the company sought shareholders' approval and the valuation has been monitored by various financial institutions and regulators. They alleged that the motive behind the petition is that a dispute arise on the repayment of an unsecured loan provided by the investor to the company earlier when the company was repaying a Foriegn Currency Convertible Bond (FCCB).
Orchid Pharma also argued that 22 banks are involved in the CDR of the company and the creditors are sacrificing around Rs 364.38 crore as part of the CDR, which is mostly the interest on the credit. Orchid Pharma, which has been reeling under debt for the past few years, has around Rs 3,500 crore, according to recent reports.
The hearing was held as per the directive of the Madras High Court which has instructed that the CLB should complete the hearing by April 30. Earlier, the Southern Regional Bench of CLB in Chennai,has rejected the request for interlocutory order to stay the CDR proposal, following which the investors approached the Madras High Court.
According to the shareholding patter of Orchid Pharma in December, 2013, Serum Institute of India Limited, Adurjee & Bros Pvt Ltd, Chakan Investment Private Limited, Fortune Intercontinental Private Limited and Cyrus Poonawalla together holds around 14.63 per cent stake in the Chennai-based pharma firm.
More From This Section
Poonawalla, Chairman of Poonawalla Group which includes Serum Institute of India, a biotech major in the country, has been investing into the company, picking up stakes in the past through various firms. Orchid Pharma representatives has also mentioned the investor as a "friendly investor" earlier.
According to earlier reports, the CDR scheme includes the sale of Orchid Pharma's penecillin and penems API business together with its manufacturing facilities at Aurangabad, Maharashtra and associated R&D facility at Sholinganallur, Chennai for a cash consideration of about Rs 1,348 crore to Hospira.
It also include repayment of a portion, Rs 681 crore, of the total debt to lenders out of the sale proceeds and restructuring of the balance debt of Rs 2,866 crore. Around Rs 430 crore from the sale proceeds for meeting the working capital requirements of the company. The restructured debt together with funded loans would have to be repaid over a period of 8 years starting from April 2015 subject to regulatory approvals.