Firm says proposed plan will not involve any equity dilution.
Jubilant Organosys, a New Delhi-based pharmaceutical company, plans to buy back $253 million worth of foreign currency convertible bonds (FCCBs) after shares of the company slumped, making it unattractive for investors to convert their bond holdings.
Jubilant is exploring options to buy back the bonds from investors through debt, according to the company. The promoter group owns 50 per cent of the drug maker.
"The proposed plan will not involve any equity dilution," Shyam S Bhartia, chairman and managing director of Jubilant Organosys, told Business Standard. "We are exploring all other options,’’ he said.
Last month, the Reserve Bank of India allowed Indian companies to prematurely buy back FCCBs by using funds raised through external commercial borrowings (ECBs). The rule was further relaxed earlier this month by allowing companies to use rupee reserves to redeem overseas debt.
The central bank’s move was aimed at strengthening local companies’ balance sheet by reducing their vulnerability to the volatility of overseas debt.
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Reliance Communications, Amtek Auto, Orchid Chemicals, Bharat Forge, United Phosphorus and Wockhardt are reportedly exploring options to buy back their FCCBs after the central bank announced its revised rules.
The contract research and manufacturer specialist's reserves stood at Rs 1,363 crore as of March 31, 2008, according to data available on Capital Online.
Jubilant had raised more than $275 million by selling convertible bonds overseas. The bonds are due for maturity or conversion on May 2010 and May 2011, respectively. The conversion price for bonds maturing on May 2010 was fixed at Rs 377.9 and for those maturing on May 2011 was fixed at Rs 588.9.
The company’s share price has dropped 70 per cent from its peak on May 9 of Rs 390.95. Today it fell 1.1 per cent to Rs 115.65 at the close of trading on the Bombay Stock Exchange.
In April, Jubilant had bought Canadian radiopharmaceuticals and contract manufacturing company Draxis Health Inc for $255 million and in April, 2007, it acquired US-based Hollister Stier Labs for $123 million.
Jubilant had posted 53 per cent revenue growth at Rs 1,767 crore for the first half of 2008-09, with a net profit of Rs 231.8 crore. The company has projected 50 per cent growth in revenues in FY09. In the first half, the company lost about Rs 281.8 crore following unrealised exchange loss on restatement of foreign currency borrowings, including FCCBs.
Drug companies such as Wockhardt, Ranbaxy, Aurobindo, Torrent, Orchid, Sterling Biotech, Strides Arcolab, Lupin, Panacea Biotec, Dishman and Glenmark have outstanding FCCBs.