Dhanuka Lab bid for Orchid Pharma hits new wall as one lender changes vote

Punjab National Bank (International) Limited dissents minutes before e-voting closes, taking the assents to below the 66% threshold

There has been a twist to the insolvency resolution process for Orchid Pharma Ltd, in its second attempt to find a successful resolution plan. The highest bid, offered by Dhanuka Laboratories, faced a new hurdle on Tuesday, June 11, with Punjab National Bank (International) Ltd changing its vote to dissent against the proposal, just ahead of the closing of e-voting. The decision on the resolution plan will be now taken by the National Company Law Board (NCLT).

According to a regulatory filing by Orchid Pharma, the resolution, for which the e-voting was kept open from June 7 morning 9 am to June 11 evening 4 pm, received a favourable vote by the Committee of Creditors with 67.07 per cent voting share. However, an email from Punjab National Bank (International) Ltd was received at 3.33 pm asking for a change in its e-voting for the resolution to dissenting.

Once this change is considered, the voting for the resolution plan will be 65.53 per cent, as against the required 66 per cent voting. According to an earlier disclosure by the company, if 66 per cent of the CoC votes are in favour of the highest bidder, it will be submitted to the National Company Law Tribunal (NCLT) for approval.

"Based on the legal advice received, the RP (Resolution Professional) shall file the Resolution Plan of Dhanuka with Hon'ble NCLT and seek guidance with respect to accepting the change in stand taken by Punjab National Bank (International) Ltd and on the treatment of voting percentage," the company said in a filing with the exchanges today.

The highest bid this time has seen a larger haircut than the earlier one by Ingen Capital, for Rs 1,490 crore. The quote is less than Rs 1,000 crore this time and is below the liquidation value, said sources close to the process.

Three drug companies – Gurgaon-based Dhanuka Laboratories, Chennai-based Accord Life Spec and Hyderabad-based Covalent Laboratories – were in the fray in this second-time resolution process (RP). Dhanuka is a prominent manufacturer and exporter of Oral cephalosporin APIs, where Orchid Pharma has its strengths. 

Orchid Pharma is in its second attempt to find a resolution plan under the corporate insolvency resolution process (CIRP), as the previous resolution plan by US-based Ingen Capital LLC was annulled by the NCLT.

This came after the successful bidder failed to remit the upfront payment as per norms. Ingen Capital’s resolution plan was approved by the NCLT on September 17, 2018, and as per the approved resolution plan, Ingen Capital was expected to deposit Rs 1,000 crore upfront to the financial creditors. Ingen, however, sought more information, which was not allowed by the resolution professional.

The NCLT, on February 28, annulled Ingen’s resolution plan and allowed 105 days for the CIRP, considering the time lost from the date of previous expression of interest, November 16, 2017, to the date of annulment of the approved resolution plan of Ingen Capital.

It has also reinstated the RP and the CoC to ensure running of the company as a going concern.