Debt-ridden Wockhardt Ltd will have to repay loans and related liabilities worth Rs 1,414.4 crore before the end of 2009 if the company fails to get its debts rescheduled through the corporate debt restructuring (CDR) programme, said the auditors' report for year 2008.
The liabilities of Wockhardt are greater than the currently expected cash flows from business and any committed or contracted sources of funds, said S R Batliboi and Co, which audited the financial statements. The auditors' report, dated April 24, also said the company's ability to continue as an operational firm is dependent on the successful outcome of its application for a CDR scheme.
Meanwhile, sources close to the company said the CDR process was in the final stages of completion and could be announced within 4-5 weeks. While the boards of some of the banks have approved the CDR, others will decide within 1-2 weeks. The bankers will have to sign a joint document, which may happen within another two-three weeks.
A Wockhardt spokesperson declined to comment on the CDR and on the auditors’ report.
Meanwhile, banking sources said that, as part of the CDR, the promoter will have to bring in an additional Rs 40 crore over a period of two years. The debt repayment structure for Wockhardt is likely to be spread over six years after a two-year moratorium.
While the debt restructuring is for loans already extended, the company will need fresh credit for running the business. Existing lenders who are part of CDR, may or may not be comfortable to lend more to Wockhardt. They have a first right for refusal. Some banks, which don’t have an exposure to the ailing drug major, may be interested to lend to Wockhardt. This is basically because the terms could be attractive for them as new lender(s) have a priority for payment over existing lenders, they added.
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In its annual report, Wockhardt had said it decided to approach the CDR cell through ICICI Bank to restructure the outstanding liabilities as it had to pay Foreign Currency Convertible Bonds (FCCBs) loan of $108.50 million (close to Rs 520 crore) and other foreign currency loans worth $250 million. In the past few months, it was speculated that Wockhardt had immediate liabilities ranging between Rs 800 crore and Rs 1,000 crore, but the company did not disclose the exact details on liabilities.
Wockhardt, which sold its subsidiary Esparma and the animal health division within the past few weeks, is yet to officially disclose the earnings from sale of these units. Sources close to the company had claimed the German subsidiary Esparma was sold to Mova GmbH for Rs 120 crore and animal health division to Vétoquinol, a French veterinary care company for Rs 170 crore.
Batliboi also admitted that it did not audit the financial statements of certain subsidiaries, whose financial statements reflect total assets of Rs 4, 549.1 crore and net revenues of Rs 2,597.6 crore as on December 31, 2008. It also did not audit the financial statements of an associate in whose financial statements the group's share of profit is Rs 204.80 million.
“These financial statements have been audited by other auditors whose reports have been furnished to us,” said Batliboi.
Wockhardt had a consolidated turnover of Rs 3,592.6 crore for year 2008, with a loss of Rs 138.9 crore.
Interestingly, in May end, Wockhardt had announced to appoint BDO Haribhakti as statutory auditors for 2009, replacing S R Batliboi and Co which was the auditor for the firm for the last six years.
Wochkhardt had to postpone the release of its fourth quarter and annual results for 2008 till April 24 as the firm's auditors were not able to finalise the accounts in time. Results were delayed as the auditors had asked for some vital information pertaining to foreign exchange losses and restructuring of various overseas business and Wockhardt could not provide them in time, sources had said.