The sale of 10 key proporties will overnight turn Habil Khorakiwala-promoted Wockhardt Hospitals from being among the top four healthcare chains in India to a minnow. But it will give the promoters the much-needed cash to keep the lenders to Wockhardt, the home-grown pharma company, at bay and also help in rejuvenating the hospital business.
The sale of the 10 hospital proporties to Fortis Healthcare will help Khorakiwala repay the Rs 500 crore debt on Wockhardt Hospital's books. These ten hospitals, with a turnover of Rs 313 crore in 2008-09, were contributing close to 85 per cent of the chain's total revenues, said sources.
At present Apollo, Fortis, Wockhardt and the Manipal Group are the leading hospital chains in India.
In early 2008 as the stock markets fell and the Reliance Power sucked out liquidity, the fortunes of Wockhardt Group faced a sudden reversal as it was forced to drop the proposed Rs 800-crore initial public offer (IPO) for Wockhard Hospitals.
Khorakiwala and his family had borrowed heavily, pledging the hospitals and other assets such as the corporate office in Mumbai's Bandra-Kurla Complex, mainly to fund the expansion plans of the hospital chain.
The mark-to-market losses on the forex transactions undertaken by Wockhardt to fund overseas operations and the global financial crisis added to the troubles. By the end of December, pharma-maker Wockhardt's debt rose to over Rs 3400 crore.
The lenders, led by ICICI Bank, recently approved a loan restructuring package for Wockhardt. Under the package approved by the corporate debt restructuring sheme, Wockhardt had to sell non-core businesses at an estimated value of Rs 790 crore through divestment process in six years, to repay the priority loans. In return for a one-year moratorium on loan repayment, the lenders also got the promoters to invest another Rs 70 crore into the company.
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So far, Wockhardt sold its loss making German subsidiary Esparma to Mova GmbH and animal health division to Vétoquinol, a French veterinary care company to raise close to Rs 300 crore. Wockhardt recently raised another Rs 625 crore through the sale of its nutrition business to Abbot.
If the bankers had disapproved the CDR package, Wockhardt would have to pay loans and related liabilities worth Rs 1, 414.4 crore before the end of 2009, according to its auditor Batliboi and Co.
A series of acquisitions in 2006 and 2007 had helped Wockhardt grow as one of the top drug makers in India. In October 2006, Wockhardt acquired Ireland based Pinewood Laboratories for $150 million to enter Ireland and to leverage Pinewood's marketing network in Europe. Within another five months, the company acquired Negma Laboratories for $265 million to enter the French market and to access its portfolio of 172 patents and distribution network. In November, 2007, the company again paid another $38 million to buy Morton Grove Pharmaceuticals in the US, to quickly broaden its portfolio in the US market by adding another 31 products.