MIRA INFORM REPORT

 

 

Report Date :

18.09.2012

 

IDENTIFICATION DETAILS

 

Name :

ORCHID CHEMICALS AND PHARMACEUTICALS LIMITED

 

ORCHID HEALTHCARE – A DIVISION OF ORCHID CHEMICALS AND PHARMACEUTICALS LIMITED

 

 

Registered Office :

‘Orchid Towers’, 313, Valluvar Kottam High Road, Nungambakkam, Chennai – 600 034, Tamilnadu

 

 

Country :

India

 

 

Financials (as on) :

31.03.2012

 

 

Date of Incorporation :

01.07.1992

 

 

Com. Reg. No.:

18-022994

 

 

Capital Investment/ Paid-up Capital:

Rs.704.421 Millions

 

 

CIN No.:

[Company Identification No.]

L24222TN1992PLC022994

 

 

TAN No.:

[Tax Deduction & Collection Account No.]

CHEO03079G

CHEO00121C

 

 

Legal Form :

A Public Limited Liability company. The company’s Share are Listed on the Stock Exchange.

 

 

Line of Business :

Manufacturer and Seller of Pharmaceutical Products and Bulk Drugs.

 

 

No. of Employees:

4455 (Approximately)

 

 

RATING & COMMENTS

 

MIRA’s Rating :

A (62)

 

RATING

STATUS

PROPOSED CREDIT LINE

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

Fairly Large

 

Maximum Credit Limit :

USD 47780000

 

 

Status :

Good

 

 

Payment Behaviour :

Regular

 

 

Litigation :

Exist

 

 

Comments :

Subject is a well established company having fine track. Financial position of the company appears to be sound. Trade relations are reported as fair. Business is active. Payments are reported to be regular and as per commitments.

 

The company can be considered normal for business dealings at usual trade terms and conditions.

 

 

NOTES:

 

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

 

 

ECGC Country Risk Classification List – June 30, 2012

 

Country Name

Previous Rating

(31.03.2012)

Current Rating

(30.06.2012)

India

A1

A1

 

Risk Category

ECGC Classification

Insignificant

 

A1

Low

 

A2

Moderate

 

B1

High

 

B2

Very High

 

C1

Restricted

 

C2

Off-credit

 

D

 

INDIAN ECONOMIC OVERVIEW

 

India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7% per year since 1997. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of India's output, with only one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong domestic demand - and growth exceeded 8% year-on-year in real terms. However, India's economic growth in 2011 slowed because of persistently high inflation and interest rates and little progress on economic reforms. High international crude prices have exacerbated the government's fuel subsidy expenditures contributing to a higher fiscal deficit, and a worsening current account deficit. Little economic reform took place in 2011 largely due to corruption scandals that have slowed legislative work. India's medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including widespread poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, scarce access to quality basic and higher education, and accommodating rural-to-urban migration.

Source : CIA

 

 

EXTERNAL AGENCY RATING

 

Rating Agency Name

CARE

Rating

BBB-

Rating Explanation

Moderate degree of safety it carry moderate credit risk.  

Date

March 2012

 

 

RBI DEFAULTERS’ LIST STATUS

 

Subject’s name is not enlisted as a defaulter in the publicly available RBI Defaulters’ list.

 

 

 

EPF (Employee Provident Fund) DEFAULTERS’’ LIST STATUS

 

Subject’s name is not enlisted as a defaulter in the publicly available EPF (Employee Provident Fund) Defaulters’ list as of 31-03-2012.

 

LOCATIONS

 

 

Registered/ Corporate Office :

‘Orchid Towers’, 313, Valluvar Kottam High Road, Nungambakkam, Chennai – 600 034, Tamilnadu, India

Tel. No.:

91-44-28251532/ 28251547/ 28284776/ 28211000/ 28230000

Fax No.:

91-44-28284983/ 28211002

E-Mail :

orchid@giasmd01.vsnl.net.in

corporate@orchidpharma.com

Website :

http://www.orchidpharma.com

 

 

Head Office :

‘Orchid Towers’, 152, Village Road, Nungambakkam, Chennai – 600 034, Tamilnadu, India

 

 

Factory 1 (API Facilities) :

Alathur Works

Plot Nos.85-87, 98-100, 126-131, 138-151 and 159-164, SIDCO Industrial Estate, Alathur, Kancheepuram District – 603110, Tamilnadu, India

Tel. No.:

91-44-27446402/ 403/ 205/ 206/ 320

Fax No.:

91-44-27446321

 

 

Factory 2 (API Facilities) :

Aurangabad Works

L-8 and L-9, MIDC Industrial Area, Waluj, Aurangabad  District – 431136, Maharashtra, India

Tel. No.:

91-240-2554992/ 993/ 994

Fax No.:

91-240-2554968

 

 

Factory 3 (Formulations) :

B3 and B4, B11 to B14, B-77 SIDCO Industrial Estate, Alathur, Kancheepuram Dist. – 603 110, Tamilnadu, India

Tel. No.:

91-44-27156793/ 94

Fax No.:

91-44-27156816

 

 

Factory 4  (Engineering Markets) :

Plot Nos. A-10, A-11, SIDCO Industrial Estate, Alathur, Kancheepuram Dist. – 603 110, Tamilnadu, India

Tel. No.:

91-44-27446909

Fax No.:

91-44-27446657

 

 

Factory 5 :

Plot Nos. B3-B6, B11 and B14 SIPCOT Industrial Park, Irungattukottai, Sriperumbudur – 602 105, Tamilnadu, India

 

 

Factory 6 :

Vinay Bhavya Complex, No.159A, I Floor, ‘A’ Wing, C S T Road, Kalina, Santacruz, Mumbai – 400 098, Maharashtra, India

 

 

R and D Centre 1 :

 Plot No. 476 / 14, Old Mahabalipuram Road, Sholinganallur, Chennai – 600 119, Tamilnadu, India

Tel No.:

91-44-24503137/ 1474/ 1477/ 2246

Fax No.:

91-44-24501396/ 1650

 

 

R and D Centre 2 :

Plot No. B21-B23 and B31-B33, SIPCOT Industrial Park, Irungattukotti Sriperumbudur (TK.)- 602 105, Kancheepuram District, Tamilnadu, India 

 

 

Marketing Office :

Orchid Helathcare

Korovaya Val Street, H.No.7, Building 1, Entrance 1, Office 22-23, Moscow, Russia

Tel. No.:

007495-5141032/ 33

Fax No.:

007495-5141034

 

 

DIRECTORS

 

As on 31.03.2012

 

Name :

Mr. K. Raghavendra Rao

Designation :

Chairman and Managing Director

Qualification :

B.Com., PGDM (IIM-A), ACS, AICWAI

Date of Appointment :

13.07.1992

 

 

Name :

Mr. S. Krishnan

Designation :

Executive Director and Chief Financial Officer

 

 

Name :

Mr. Deepak Vaidya

Designation :

Director

 

 

Name :

Mr. Bharat D. Shah

Designation :

Director

 

 

Name :

Prof. Bala V Balachandran

Designation :

Director

 

 

Name :

K Biju George (IDBI Nominee)

Designation :

Director

Date of Appointment:

06.06.2012

 

.

KEY EXECUTIVES

 

Name :

Mrs. Bhoomijha Murali

Designation :

Company Secretary 

 

 

MANAGEMENT TEAM:

 

Name :

Dr. B. Gopalam

Designation :

Chief Scientific Office

 

 

Name :

Ms Edna Braganza

Designation :

Chief Operating Officer - API

 

 

Name :

Mr. Madhusudan Rao

Designation :

Chief Operating Officer – Global Generics

 

 

Name :

Mr. M S Rangesh

Designation :

Chief Human Resources Officer

 

 

Name :

Mr. S Mani

Designation :

Head API - Process Research

 

 

Name :

Dr. R Buchi Reddy

Designation :

Senior Vice President – Process Research

 

 

Name :

Mr. P N Deshpande

Designation :

Senior Vice President - Manufacturing

 

 

Name :

Dr Shridhar Narayanan

Designation :

Executive Vice President – Biology

 

 

Name :

Mr. S Sridharan

Designation :

Senior Vice President – IT and IE

 

 

Name :

Mr. V S Padalkar

Designation :

Vice President - Projects and Maintenance

 

 

Name :

Mr. K V V Raju

Designation :

Vice President - Technical Operations

 

 

Name :

Dr. U P Senthil Kumar

Designation :

Senior Vice President – Process Research

 

 

Name :

Dr. Shashank Narayanrao

Designation :

Senior Vice President – Quality Lulay Assurance (Formulations)

 

 

Name :

Dr C V Srinivasan

Designation :

Senior Vice President – Medicinal Chemistry

 

 

Name :

Dr. J Surya Kumar

Designation :

Senior Vice President-Formulation Development

 

 

Name :

Mr. Deepak M B Nayyar

Designation :

Vice President - Domestic Formulations

 

 

Name :

Mr. C R Dwarakanath

Designation :

Vice President – SH and E

 

 

Name :

Mr. Gurmeet Singh

Designation :

Vice President - Commercial

 

 

Name :

Mr. V C Nagaraj

Designation :

Vice President - Human Resources

 

 

Name :

Mr. V S Padalkar

Designation :

Vice President - Projects and Maintenance

 

 

Name :

Mr. K V V Raju

Designation :

Vice President - Technical Operations

 

 

Name :

Mr. Sampath Parthasarathy

Designation :

Vice President - Domestic Formulations

 

 

Name :

A Suresh Babu

Designation :

Vice President – Corporate Affairs

 

 

 

 

BOARD OF COMMITTEES :

 

Audit Committee :

·         Mr. Deepak Vaidya, Chairman

·         Prof. Bala V Balachandran

·         Mr. Bharat D Shah

·         K Biju George

 

 

Compensation Committee:

 

·         Mr. K Raghavendra Rao, Chairman

·         Mr. Bharat D Shah

·         K Biju George

 

 

Investors’ Grievance

Committee

·         Mr. K Raghavendra Rao, Chairman

·         Mr. Bharat D Shah

·         Mr. S Krishnan

 

 

Remuneration Committee:

 

·         Mr. Deepak Vaidya, Chairman

·         Mr. Bharat D Shah

·         K Biju George

 

 

Allotment Committee:

·         Mr. K Raghavendra Rao, Chairman

·         Mr. S Krishnan

 

 

 

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

 

As on 30.06.2012

 

Category of Shareholders

No. of Shares

Percentage of Holding

(A) Shareholding of Promoter and Promoter Group

 

 

(1) Indian

 

 

Individuals / Hindu Undivided Family

19,194,457

28.56

Bodies Corporate

3,646,324

5.42

Sub Total

22,840,781

33.98

(2) Foreign

 

 

Total shareholding of Promoter and Promoter Group (A)

22,840,781

33.98

(B) Public Shareholding

 

 

(1) Institutions

 

 

Mutual Funds / UTI

153500

0.23

Financial Institutions / Banks

41007

0.06

Insurance Companies

3134960

4.66

Foreign Institutional Investors

8583203

12.77

Sub Total

11912670

17.72

(2) Non-Institutions

 

 

Bodies Corporate

15492294

23.05

Individuals

 

 

Individual shareholders holding nominal share capital up to Rs.0.100 million

13732557

20.43

Individual shareholders holding nominal share capital in excess of Rs.0.100 million

2569808

3.82

Any Others (Specify)

627,393

1.01

Non Resident Indians

661978

0.98

Overseas Corporate Bodies

300

-

Foreign Corporate Bodies

15,000

0.02

Sub Total

32471937

48.30

Total Public shareholding (B)

44384607

66.02

Total (A)+(B)

67225388

100.00

(C) Shares held by Custodians and against which Depository Receipts have been issued

-

-

(1) Promoter and Promoter Group

-

-

(2) Public

3,226,688

-

Sub Total

3,226,688

-

Total (A)+(B)+(C)

70,452,076

-

 

 

 

BUSINESS DETAILS

 

Line of Business :

Manufacturer and Seller of Pharmaceutical Products and Bulk Drugs.

 

 

 

 

PRODUCTION STATUS (AS ON 31.03.2011)

 

Particulars

Unit

Regd/ Licensed

Installed

 

Bulk Drugs and Intermediates

 

 

 

Oral and Sterile

MT

1.025

1.016

 

 

 

 

Dosage Forms

 

 

 

Vials

Nos. Millions

--

--

Tablets

Nos. Millions

1579

576

Capsules

Nos. Millions

225

225

Dry syrups/Powders

Nos. Millions

13

13

 

 

Particulars

Unit

Actual Production

 

Drugs - Oral and Sterile

(in MT)

1025

Electricity

(Rs lakhs per MT)

5.02

Furnace Oil

(Rs lakhs per MT)

1.54

Coal

(Rs lakhs per MT)

0.95

Others

--

Nil

 

 

 

GENERAL INFORMATION

 

No. of Employees :

4455 (Approximately)

 

 

Bankers :

·         Allahabad Bank

·         Andhra Bank

·         Axis Bank Limited

·         Bank of India

·         Bank of Baroda

·         Canara Bank

·         Central Bank of India

·         ICICI Bank Limited

·         IDBI Bank Limited

·         Indian Bank

·         Indian Overseas Bank

·         Punjab National Bank

·         State Bank of India

·         State Bank of Hyderabad

·         State Bank of Travancore

·         The Federal Bank Limited

·         Union Bank of India

 

 

Facilities :

Rs. In Millions

Secured Loans

As on 31.03.2012

Rs. in millions

As on 31.03.2011

Rs. in millions

LONG TERM BORROWINGS

 

 

Rupee Term loans

5740.191

5165.813

Foreign currency Term loan

7841.410

3148.912

Foreign Currency Convertible Bonds (FCCB)

0.000

5235.847

Premium payble on redemption of FCCBs

0.000

2239.372

Less:- Current maturities transferred to Current

liabilities

2840.131

9749.384

Long term maturities of finance lease

0.000

0.051

SHORT TERM BORROWING

 

 

Other loans and advances

 

 

Rupee & Foreign Currency Packing Credit/Cash credit & Advance against Bills

6378.832

4898.609

 

17120.302

10939.220

 

Particular

Repayment terms

Balance No of installments due

Rate of interest

Amt due @

Rupee term loan

Monthly

118

14.75% to 16.25%

2155.602

 

Quarterly

55

14.75% to 16%

3584.589

Foreign Currency Term Loan

Half yearly

10

LIBOR + 3.75%

2422.690

 

Quarterly

100

LIBOR + 3 to 4.6%

5418.720

 

LONG TERM BORROWINGS

 

@amount due includes for all installments in the respective category

 

Terms of repayment of loan- All Indian rupee loan from bank carries interest @14.75% to 16.25% p.a. These loans are repayable in 36 to 54 equivated monthly and 8 to 18 quarterly installments from the date of the origination. These loans are secured by Pari Passu charge by way of joint mortgage on immovable and movable assets situated at Factory premises at SIDCO Industrial Area, Alathur, MIDC Industrial Area, Aurangabad, SIPCOT Industrial Park, Irungattukottai and R&D premises at Shozhanganallur and current assets, subject to prior charges created/ to be created on current assets in favour of bankers and financial institutions for securing working capital borrowings. Total term loans aggregating Rs 53,652.89 Millions are additionally secured by personal guarantee of Shri K Raghavendra Rao, Chairman & Managing Director of the Company.

 

Terms of repayment of loan- All Foreign Currency term loan carries interest @ LIBOR plus 3 to 4.6%. The loan is repayable in 8 to 24 quarterly and 10 half yearly installments from the date of the orgination. These loans are secured by Pari Passu charge by way of joint mortgage on immovable and movable assets situated at Factory premises at SIDCO Industrial Area, Alathur, MIDC Industrial Area, Aurangabad, SIPCOT Industrial Park, Irungattukottai and R&D premises at Shozhanganallur and current assets, subject to prior charges created/ to be created on current assets in favour of bankers and financial institutions for securing working capital borrowings. Total term loans aggregating Rs 54,187.20 Millions are additionally secured by personal guarantee of Shri K Raghavendra Rao, Chairman & Managing Director of the Company. The terms of the foreign currency term loan availed in February 2012 includes covenants pertaning to financial parameters such as limit on aggregate debt outstanding, debt service coverage ratio, ratio of net borrowings to EBDITA, Fixed assets coverage ratio, ratio of net borrowings to tangible networth etc., tested on the consolidated

financial statements of the Company.

 

The Company raised FCCBs during 2006-07 aggregating to US$ 175 million (Rs 7735.875 Millions) with an option to the investor to convert the FCCBs into equity shares of the Company at an initial conversion price of Rs 348.335 per share at a fixed rate of exchange on conversion Rs 43.93 = US$ 1, at any time after April 9, 2007 and prior to February 18, 2012. Further the Company had an option of early redemption of these FCCBs in whole at any time on or after February 28, 2010 and prior to February 21, 2012, subject to certainconditions. Unless previously converted, redeemed or repurchased and cancelled, the FCCBs were to be redeemed on February 28, 2012 at 142.77 % of their principal amount. During the year 2008-09, the Company bought back FCCBs to the extent of US$ 37.80 million and the outstanding FCCBs as at March 31, 2009 was US$ 137.20 million.

 

During the year 2009-10, the Company bought back FCCBs to the extent of US$ 19.778 million and the outstanding FCCBs as at March 31, 2011 was US$ 117.422 million.

 

During the year 2011–12, the Company redeemed the outstanding FCCBs, including yield-to-maturity at 142.77% of the principal amount aggregating to US$ 167.64 million (Rs 8240.800 Millions) on the due date ie. February 28, 2012.

 

The Company raised FCCBs during the year 2005-06 aggregating to US$ 42.50 million (Rs 1928.450 Millions) including a green shoe option of US$ 5 million (Rs 228.950 Millions) with an option to the investor to convert the FCCBs into equity shares or global depository receipts at an initial conversion price of Rs 243.80 per share at a fixed rate of exchange on conversion Rs 44.94 = US$ 1. Out of the above, FCCBs amounting to US$ 22.79 million (Rs 1024.182 Millions) were converted.

 

Further, the Company had an option of early redemption of these FCCBs at any time after November 03, 2006 subject to certain conditions. Unless previously converted, redeemed or repurchased and cancelled, the FCCBs were to be redemeed on November 03, 2010 at 147.1688% of their principal amount. During 2008-09, the Company bought FCCBs to the extent of US$ 2.25 million and the outstanding FCCBs as at March 31, 2010 was US$ 17.46 million. During the year 2010 – 11, the Company redeemed the outstanding FCCBs, aggregating to US$ 25.69 million (Rs 1140.952 Millions) including yield-to-maturity, on the due date i.e. November 03, 2010.

 

SHORT TERM BORROWINGS

Packing Credit and Advances against bills from Banks and Working Capital Loans from Banks are secured by first charge on all current assets namely, Stocks of Raw materials, Semi-finished & Finished Goods, Stores and Spares not relating to Plant & Machinery (Consumable Stores and Spares), Bills Receivable, Book Debts & all other movable property both present and future excluding such movables as may be permitted by the Banks/ Financial Institutions from time to time and by second charge on immovable properties after charges created/ to be created on immovable assets in favour of Financial Institutions/Banks for securing term loans. The borrowings from banks are additionally secured by personal guarantee of Shri K Raghavendra Rao, Chairman & Managing Director of the Company.

 

 

 

 

 

 

Banking Relations :

--

 

 

Auditors :

 

Name :

Statutory Auditors

SNB Associates

Chartered Accountants

No. 12, 3rd Floor, Gemini Parsn Complex, 121, Anna Salai, Chennai – 600 006, Tamilnadu, India

 

Cost Auditors

V. Kalyanaraman

Cost Accountants

No. 4 (Old No. 12), Second Street, North Gopalapuram, Chennai – 600 086, Tamilnadu, India

 

 

Subsidiaries :

·         Orchid Europe Limited, UK

·         Orchid Pharmaceuticals Inc., USA

·         Orgenus Pharma Inc., USA (Subsidiary of Orchid Pharmaceuticals Inc., USA.)

·         Orchid Pharma Inc./ Karalex Pharma USA, (Subsidiary of Orchid Pharmaceuticals Inc., USA)

·         Orchid Research Laboratories Limited, India (ORLL)

·         Orchid Pharmaceuticals SA (Proprietary) Limited, South Africa (OPL, SA)

·         Bexel Pharmaceuticals Inc., USA

·         Diakron Pharmaceuticals Inc., USA

·         Orchid Pharma Japan KK

 

 

Joint Venture :

·         NCPC Orchid Pharmaceuticals Company Limited, (NCPC, China)

 

 

Companies in which relatives of Key Management personnel exercise significant

Influence:

Spectrasoft Technologies Limited, India

 

 

CAPITAL STRUCTURE

 

 

As on 31.03.2012

 

Authorised Capital :

No. of Shares

Type

Value

Amount

100000000

Equity Shares

Rs.10/- each

Rs.1000.000 Millions

 

 

 

 

 

Issued, Subscribed & Paid-up Capital:

No. of Shares

Type

Value

Amount

70442076

Equity Shares

Rs.10/- each

Rs.704.421 Millions

 

 

 

 

 

 

Note:

( Previous year - 70,442,076) equity Shares of Rs 10/- each fully paid. Of the above 17,376,940 Equity shares of Rs10/- each were allotted as fully paid bonus shares by capitalisation of reserves.

 

The reconciliation of the number of shares outstanding as at March 31, 2012 and March 31, 2011 is set out below:

 

Number of shares at the beginning

70442076

Add: Allotment on exercise of ESOP

-

Number of shares at the end

70442076

 

 

Share Allotments during the preceding five years

 

ESOP

No. of shares

2010-11

NI

2009-10

Nil

2008-09

31300

2007-08

34485

2006-07

11040

 

 

FCCB

 

2006-07

1152069

 

The details of shareholder holding more than 5% shares is set out below:

 

Particular

No. of shares

% Held

K Raghavendra Rao

6925173

9.83

R Vijayalakshmi

6821155

9.68

Orchid Healthcare Private limited

3646324

5.18

 

 

ORCHID-ESOP 2010 SCHEME

 

In terms of the resolution passed by the Company at the AGM held on July 21, 2010 the shareholders approved the scheme formulated under “ORCHID-ESOP 2010” for allotting 1,000,000 options. Accordingly 901,000 options were granted to the eligible Employees and the Executive Director except the Promoter Director by the Compensation Committee of the Board of Directors at a meeting held on October 28, 2010. Each option is convertible into one equity share of Rs 10/- each at a price of Rs 329.55 per share, being the closing share price of Orchid in the National Stock Exchange on October 27, 2010, the day prior to the date of the meeting.

 

Considering the fall in the price of the shares of the Company and in the interest of the employees, the Compensation Committee of the Board of Directors at its meeting held on November 1, 2011 considered repricing of 864,500 options in force on the said date from Rs 329.55 to Rs 166.15 as per the closing share price of Orchid at National Stock Exchange on October 31, 2011. Out of the total options granted, 47,000 options have already lapsed and the remaining granted options in force as at March 31, 2012 under ORCHID-ESOP 2010 Scheme are 854,000.

 

The one year vesting period for the scheme ended on October 27, 2011 and the employees can exercise their right to convert the options into equity shares from October 28, 2011 onwards. The options will lapse on October 28, 2013, if they are not exercised within a period of 2 years from the date of vesting of options. As at March 31, 2012, no options were exercised.

 

ORCHID-ESOP Director S 2011 SCHEME

 

In terms of the resolution passed by the Company at the AGM held on July 29, 2011 the shareholders approved a scheme formulated as “ORCHID-ESOP Directors 2011 SCHEME” for allotting 500,000 options to the Directors of the Company. Accordingly 300,000 options were granted to the Directors of the Company including the Whole Time Director but excluding the Promoter Director, by the Compensation Committee of the Board of Directors at a meeting held on November 01, 2011. Each option is convertible into one equity share of Rs 10/- each at a price of Rs 166.15 per share, being the closing share price of Orchid in the National Stock Exchange on October 31, 2011, the day prior to the date of the meeting. Out of the total options granted, 50,000 options have already lapsed and remaining granted options in force as of March 31, 2012 under ORCHID-ESOP Directors 2011

Scheme are 250,000

 

ORCHID-ESOP SENIOR MANAGEMENT 2011 SCHEME

 

In terms of the resolution passed by the Company at the AGM held on July 29, 2011 the shareholders approved the scheme formulated as “ORCHID-ESOP Senior Management 2011 SCHEME” for allotting 1,000,000 options to the senior employees of the Company out of which 750,000 options will be granted to the employees of the Company and 250,000 options will be granted to the employees of its subsidiary companies. Accordingly 42,700 options were granted to the senior employees of the Company by the Compensation Committee of the Board of Directors at a meeting held on November 01, 2011. Each option is convertible into one equity share of Rs 10/- each at a price of Rs 10/- each (i.e. At Par). 42,700 options are in force as at March 31, 2012 under ORCHID-ESOP Senior Management 2011 Scheme.”

 

FINANCIAL DATA

[all figures are in Rupees Millions]

.

ABRIDGED BALANCE SHEET

 

SOURCES OF FUNDS

 

31.03.2012

31.03.2011

31.03.2010

SHAREHOLDERS FUNDS

 

 

 

1] Share Capital

704.421

704.421

704.421

2] Share Application Money

0.000

0.000

0.000

3] Reserves & Surplus

11241.088

10635.827

9091.928

4] (Accumulated Losses)

0.000

0.000

0.000

NETWORTH

11945.509

11340.248

9796.349

LOAN FUNDS

 

 

 

1] Secured Loans

17120.302

10939.220

10217.592

2] Unsecured Loans

0.000

0.000

0.000

3] Foreign Currency Convertible Bonds

0.000

0.000

6077.446

TOTAL BORROWING

17120.302

10939.220

16295.038

DEFERRED TAX LIABILITIES

1711.834

1945.556

0.000

Foreign Currency Monetary Items Translation difference Account

(482.413)

0.0000

176.147

 

 

 

 

TOTAL

30295.232

24225.024

28305.628

 

 

 

 

APPLICATION OF FUNDS

 

 

 

 

 

 

 

FIXED ASSETS [Net Block]

19546.829

16065.360

14634.141

Capital work-in-progress

3270.908

3198.292

2514.313

Advance for Capital Items

0.000

0.000

2170.053

 

 

 

 

INVESTMENT

1489.029

1304.183

1235.652

DEFERREX TAX ASSETS

0.000

0.000

0.000

OTHER NON CURRENT ASSETS

30.364

167.871

0.000

 

 

 

 

CURRENT ASSETS, LOANS & ADVANCES

 

 

 

 

Inventories
6235.991
5802.633
4025.273

 

Sundry Debtors
913.093
4811.061
7162.325

 

Cash & Bank Balances
1695.851

1931.768
3249.090

 

Other Current Assets
0.000

0.000
0.000

 

Loans & Advances
5804.473

5602.720
2889.279

Total Current Assets
14649.408

18148.182

17325.967

Less : CURRENT LIABILITIES & PROVISIONS
 

 

 

 

Sundry Creditors
3576.329

2615.047
3064.782

 

Other Current Liabilities
4528.870

10355.778
2911.375

 

Provisions
586.107

1688.039
3598.341

Total Current Liabilities
8691.306

14658.864

9574.498

Net Current Assets
5958.102

3489.318

7751.469

 

 

 

 

MISCELLANEOUS EXPENSES

0.000

0.000

0.000

 

 

 

 

TOTAL

30295.232

24225.024

28305.628

 

 

PROFIT & LOSS ACCOUNT

 

 

PARTICULARS

31.03.2012

31.03.2011

31.03.2010

 

 

SALES

 

 

 

 

 

Income

17363.306

16633.450

22651.375

 

 

Other Income

558.117

487.996

98.000

 

 

TOTAL                                     (A)

17921.423

17121.446

22749.375

 

 

 

 

 

Less

EXPENSES

 

 

 

 

Cost of materials consumed

8024.150

8761.969

 

 

 

Purchases of stock-in-trade

454.638

341.438

 

 

 

Employee benefits expense

1546.459

1413.846

 

 

 

Other expenses

4399.069

3854.684

 

 

 

Exceptional items

838.814

(206.909)

 

 

 

Changes in inventories of finished goods, work-in-progress

and stock-in-trade

(620.186)

(1223.824)

 

 

 

Extraordinary Items

(800.000)

0.000

 

 

 

TOTAL                                    

13842.944

12941.204

14225.467

 

 

 

 

 

Less

PROFIT/ (LOSS) BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B)      (C)

4078.479

4180.242

8523.908

 

 

 

 

 

Less

FINANCIAL EXPENSES                         (D)

1790.529

1157.650

2412.331

 

 

 

 

 

 

PROFIT/ (LOSS) BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D)                               (E)

2287.950

3022.592

6111.577

 

 

 

 

 

Less/ Add

DEPRECIATION/ AMORTISATION                     (F)

1490.556

1284.543

1511.038

 

 

 

 

 

 

PROFIT/ (LOSS) BEFORE TAX (E-F)                  (G)

797.394

1738.049

4600.539

 

 

 

 

 

Less

TAX                                                                  (H)

233.722

143.213

1287.143

 

 

 

 

 

 

PROFIT/ (LOSS) AFTER TAX (G-H)                   (I)

1031.119

1594.836

3313.396

 

 

 

 

 

Add

PREVIOUS YEARS’ BALANCE BROUGHT FORWARD

600.939

585.915

283.222

 

 

 

 

 

Less

APPROPRIATIONS

 

 

 

 

 

Excess provision of dividend and tax thereon of earlier year written back

 

(217.429)

(24.735)

 

 

Transfer to General Reserve

NA

1500.000

2000.000

 

 

Proposed Dividend

 

255.752

887.959

 

 

Tax on Dividend

 

41.489

147.479

 

BALANCE CARRIED TO THE B/S

NA

600.939

585.915

 

 

 

 

 

 

EARNINGS IN FOREIGN CURRENCY

 

 

 

 

 

Export Earnings

8466.593

7258.533

9762.036

 

 

Export of Services including royalty/ know how (net of withholding tax)

461.797

609.206

289.843

 

TOTAL EARNINGS

8928.390

7867.739

10051.879

 

 

 

 

 

 

IMPORTS

 

 

 

 

 

Raw Materials

4594.516

4715.756

3099.750

 

 

Stores & Spares

2304.970

273.276

73.289

 

 

Capital Goods

189.484

784.127

613.916

 

TOTAL IMPORTS

7088.97

5773.159

3786.955

 

 

 

 

 

 

Earnings Per Share (Rs.)

 

 

 

 

-          Basic

14.64

22.64

47.04

 
  1. Diluted

14.64

18.71

37.31

 

 

QUARTERLY RESULTS

 

PARTICULARS

 

 

 

1st Quarter

30.06.2012

Net sales

 

 

3572.310

Total Expenditure

 

 

3014.200

PBIDT (Excl OI)

 

 

558.110

Other Income

 

 

0.000

Operating Profit

 

 

558.110

Interest

 

 

713.260

Exceptional terms

 

 

(80.800)

PBDT

 

 

(235.950)

Depreciation

 

 

399.130

PROFIT BEFORE TAX

 

 

635.080

Tax

 

 

(127.070)

Provision and contingencies

 

 

0.000

Profit After Tax

 

 

508.020

Extra ordinary items

 

 

0.000

Prior Period Expense

 

 

0.00

Net Adjustments

 

 

0.000

Net Profit

 

 

508.020

 

 

 

KEY RATIOS

 

PARTICULARS

 

 

31.03.2012

31.03.2011

31.03.2010

PAT / Total Income

(%)

5.75

9.31
14.56

 

 

 

 
 

Net Profit Margin

(PBT/Sales)

(%)

4.59

10.50
20.31

 

 

 

 
 

Return on Total Assets

(PBT/Total Assets}

(%)

2.33

5.08
14.39

 

 

 

 
 

Return on Investment (ROI)

(PBT/Networth)

 

0.07

0.15
0.47

 

 

 

 
 

Debt Equity Ratio

(Total Liability/Networth)

 

2.16

2.26
2.64

 

 

 

 
 

Current Ratio

(Current Asset/Current Liability)

 

1.69

1.24
1.81

 

 

 

LOCAL AGENCY FURTHER INFORMATION

 

 

Check List by Info Agents

Available in Report [Yes/No]

Year of Establishment

Yes

Locality of the Firm

Yes

Constitution of the firm

Yes

Premises details

No

Type of Business

Yes

Line of Business

Yes

Promoters background

No

No. of Employees

Yes

Name of Person Contacted

No

Designation of contact person

No

Turnover of firm for last three years

Yes

Profitability for last three years

Yes

Reasons for variation <> 20%

-

Estimation for coming financial year

No

Capital the business

Yes

Details of sister concerns

Yes

Major Suppliers

No

Major Customers

No

Payment Terms

No

Export / Import Details [If Applicable]

No

Market Information

-

Litigations that the firm / promoter involved in

Yes

Banking Details

Yes

Banking Facility Details

Yes

Conduct of the banking account

-

Buyer visit details

-

Financials, if provided

Yes

Incorporation details, if applicable

Yes

Last accounts filed at ROC

Yes

Major Shareholders, if applicable

Yes

Date of Birth of Proprietor/Partner/Director, if available

Yes

PAN of Proprietor/Partner/Director, if available

No

Voter ID No of Proprietor/Partner/Director, if available

No

External Agency Rating, if available

Yes

 

 

LITIGATION DETAILS

 

Case Status:

Pending

Status of:

WRIT APPEAL

Case No.:

88

Year:

2012

Petitioner:

UNION OF INDIA REP. BY

Respondent:

M/S. ORCHID CHEMICALS

Pet’s Advocate:

M/S. T. CHANDRASEKARAN

Res’s Advocate:

M/S R. RAGHAVAN

Category:

NO CATEGORY MENTIONED

Last Listed on: No Date Mentioned

Case Updated on:

February 17, 2012

 

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

INDUSTRY OVERVIEW

 

GLOBAL PHARMACEUTICAL INDUSTRY

 

The global pharmaceutical industry grew by of 6.6% in 2011, compared to 4.5% in 2010, and reached a market size of US$ 880 billion. The transformation of the global pharmaceutical market continues unabated, with focus steadily shifting from developed to developing countries and from patented drugs to generics. The overall pharmaceutical market is anticipated to reach US$ 1.1 trillion by 2014

 

The US is the major pharmaceutical market, globally. The contribution of the US to the global pharmaceutical growth increased to 20% in 2011, compared to 17% in 2010. Ageing population and constant demand for innovative therapies have triggered the pharmaceutical demand in 2011 and will continue in the years to come.

 

REGULATED MARKETS US

 

The US (US$ 320 billion market size) is the largest pharmaceutical market in the world growing at a CAGR of around 3%. It is also the largest generic market with a sizeable generic substitution (75% in terms of volume).

 

The US is expected to face the highest patent expiries (to the tune of US$ 100 billion) over the next five years (Source: ICRA, March 2012). The share of the US in global pharmaceutical spending is set to decline to 31% in 2015, from 41% in 2005.

 

The US market is experiencing significant drug shortages in recent times. A total of 168 drugs are facing acute shortages. The major reasons for the drug shortages include manufacturing constraints, stringent manufacturing norms, consolidation in the generic drug industry and limited supplies of some vital ingredients (Source: IMS, Drug Shortage).

 

INDIAN PHARMACEUTICAL INDUSTRY

 

India ranks third in terms of manufacturing pharma products by volume. India’s pharmaceutical industry is gaining its position as a global leader clearly topping the charts among the Indian science based industries with significant expertise in the complex field of drug manufacture and technology. India’s pharmaceutical market has registered a strong growth of 16% in 2012. This has been the highest growth in the past three years (Source: Edelweiss Monthly, April 2012). The Indian pharmaceuticals sector is poised to reach US$ 55 billion by 2020, from US$ 12.6 billion in 2009 (Source: Mckinsey, India Pharma 2020: Propelling access and acceptance realising true potential, 2010).

 

India tops in exporting generic medicines. The Indian pharma industry produces around 20% to 24% of the global generic drugs. Around 40% of the total pharmaceutical produce is exported (55% formulation and 45% APIs).

 

The Indian pharmaceutical market is expected to witness rapid and significant growth on the back of greater acceptance and penetration of generics, enhanced export opportunities, increasing global demand, and a large share of off-patent drugs in the future.

 

OUTLOOK

India’s pharmaceutical industry is at an advantageous position compared to other emerging countries. With the advantage of being a highly organised sector, the Indian pharmaceutical companies are growing at the rate of 8-9% annually.

 

HIGHLIGHTS 2011-12

·         Received USFDA approval for several products including Venlafaxine ER Capsules, Olanzapine Tablets and Levofloxacin Tablets, among others.

 

·         Received the initial US$ 1.5 million from Merck on the completion of a milestone in its anti-infectives research

      collaboration.

·         Successfully completed in Europe, Phase I trial of its orally administered PDE4 (phosphodiesterase 4 inhibitor) molecule OCID 2987, positioned for the treatment of inflammatory disorders, including COPD (Chronic Obstructive Pulmonary Disease).

 

·         Redeemed the outstanding Foreign Currency Convertible Bonds (FCCBs), including yield-to-maturity, aggregating to US$ 167.64 million on the due date, February 28, 2012.

 

·         The state-of-the-art Cephalosporin API manufacturing facility was successfully re-inspected by USFDA.

 

·         Awarded with OHSAS 18000:2007 (Occupational Health and Safety Management System) certification for the API manufacturing facility at Alathur.

 

·         The API manufacturing facility at Alathur was re-assessed and was certified with ISO 9001:2008 (Quality Management System) and ISO 14001:2004 (Environmental Management System).

 

PERFORMANCE

 

During 2011-12, the Company achieved a turnover and operating income of Rs 17363.300 Millions as compared to Rs 16633.400 Millions in 2010-11 recording a growth rate of 4.38%. The gross profit before interest, depreciation and taxes stood at Rs 4117.300 Millions (23.71% of turnover) as compared to Rs 3973.200 Millions (23.88% of turnover) of last fiscal. After providing for interest expense of Rs 1790.500 Millions (Rs 1157.600 Millions previous fiscal), depreciation of Rs 1490.500 Millions (Rs 1284.500 Millions previous fiscal), Exceptional item Rs. 838.800 Millions (Rs Nil previous fiscal) and Extraordinary item Rs 800.000 Millions (Rs Nil previous year), the profit before tax of the Company was Rs 797.400 Millions (Rs 1738.100 Millions previous fiscal). The net profit after tax stood at Rs 1031.100 Millions (5.94% of turnover) compared to the net profit after tax of Rs 1594.800 Millions (9.6% of turnover) in the previous fiscal.

 

BUSINESS OVERVIEW

During the year, the Company continued to record a strong growth in its operational performance inspite of its API plant in Alathur being closed for more than a month owing to the closure order from the Tamil Nadu Pollution Control Board (TNPCB), fire accident at the R and D centre and liquidity constraints on account of redemption of outstanding Foreign Currency Convertible Bonds. The business model change that the Company had initiated post the injectable business transfer to Hospira in 2010 continues to augur well with the several long-term supply contracts entered into with large global players paving the way for continued robust earnings. Their Active Pharmaceutical Ingredient (API) supply arrangement continued to perform significantly well, registering higher than expected business volumes.

 

The Company is planning to launch several products during the current financial year 2012-13 for the EU and US markets, which are expected to strengthen the revenue streams for regulated generics business of the Company from the current financial year 2012-13.

 

AWARDS

During the year, the Company was conferred with the following awards:

 

·         Export Excellence Award 2010-11 by MEPZ – Special Economic Zone, Government of India.

 

·         EXIM Achievement Award 2011 for meritorious export performance under the category Air Exports by The Tamil Chamber of Commerce, Chennai.

 

·         Gold Patent Award for the year 2010-11 in recognition of its commendable contribution to RandD in Drug Discovery Sector by the Pharmaceutical Export Promotion Council.

 

·         IGCW – 2011 Green Innovation Award for the outstanding research in the field of Green Chemistry and Engineering.

 

AMALGAMATION OF WHOLLY OWNED SUBSIDIARY WITH THE COMPANY

 

During the year, Orchid Research Laboratories Limited (ORLL) a wholly-owned subsidiary was merged with the Company with effect from April 01, 2010 i.e. ‘the Appointed Date’. The Hon’ble High Court of Madras had vide its Order dated March 20, 2012, sanctioned the Scheme of Amalgamation of ORLL with the Company. The scheme became effective from March 30, 2012 upon filing the certified true copy of High court orders with the Registrar of Companies, Chennai, Tamil Nadu.

 

OVERSEAS JOINT VENTURES

NCPC Orchid Pharmaceutical Company Limited, China The Company’s 50:50 joint venture in China, NCPC Orchid Pharmaceuticals established for manufacture of sterile cephalosporin Active Pharmaceutical Ingredients (API) continued to perform well. The joint venture is profitable with a significant sales turnover of US$ 52.11 million during the year .

 

SUBSIDIARIES

Bexel Pharmaceuticals Inc., USA (Bexel) During the year, Bexel became a 100% subsidiary of the Company upon amalgamation of Orchid Research Laboratories Limited with the Company. Bexel was incorporated basically to conduct Research and Development activities in New Drug Discovery segment. Bexel provides all scientific documentation to Orchid Research Laboratories Limited, which as of March 30, 2012, stands amalgamated with the Company. The current Bexel IP portfolio is being maintained by Orchid global Intellectual Property (IP) unit. During the year, Bexel has conducted advanced studies on BLX-1002, while Phase IIa clinical studies has been initiated for the indication of Non-alcoholic fatty liver disease (NAFLD) / Non-alcoholic Steatohepatitis (NASH).

 

ORCHID PHARMACEUTICALS INC., USA

Orchid Pharmaceuticals Inc., is a wholly owned Delaware based subsidiary of the Company and also the holding Company in the US, under which all the operational business subsidiaries have been structured. The Company currently has two operating Subsidiaries, namely Orgenus Pharma, Inc., and Orchid Pharma, Inc., in the US.

 

Orgenus Pharma Inc., is the entity that provides all business development and operational services for the parent Company including the initiation of marketing alliances with partner companies, filing of the Company’s Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs) as the Importer of record for the Company with the FDA. It continues to represent the Company for all matters relating to the review and approval

of such filings by the FDA and handling of logistics and product importation into the US as the Importer of Record for the US Customs.

 

Orchid Pharma, Inc., is the commercial entity that started directly marketing and selling the Company’s products in the US generics market place. Orchid Pharma Inc. has established a strong corporate image for the Company in the US and will be launching all future (unpartnered) generics products under the Orchid label.

 

 

DIAKRON PHARMACEUTICALS INC., USA

During the year, the Company increased its stake in Diakron Pharmaceuticals Inc., and holds 76.4% in the Company. Orchid’s stake in Diakron has been a part of the original transaction which includes direct investment and Master Services Agreement (MSA). The Company has completed most of its MSA obligations to develop and supply clinical quantities of Active Pharmaceutical Ingredients (API) and extended release formulations.

 

ORCHID EUROPE LIMITED, UNITED KINGDOM

The Company’s subsidiary in Europe namely Orchid Europe Limited (OEL) is a wholly owned subsidiary which provides liaising support to the parent Company and its customers in Regulatory, Pharmacovigilance, Testing and Release, Retention of samples, Service Providers and Business Development in Europe.

 

ORCHID PHARMACEUTICALS (SOUTH AFRICA) PTY LTD.,

SOUTH AFRICA

The Company’s wholly owned subsidiary, Orchid Pharmaceuticals (South Africa) Pty Ltd., was incorporated mainly to register and market the Company’s products in South Africa. The Company is in the process of submitting dossiers for obtaining marketing approval from the regulatory authority, MCC for various oral products and the applications are at various stages of the registration process.

 

ORCHID PHARMA JAPAN K K

The subsidiary Company in Japan has continued to make noteworthy progress during the year. At the end of the fiscal year 2011-12, there are 9 Drug Master Files (DMFs) filed with Pharmaceutical and Medical Devices Agency (PMDA) of Japan and additional Drug Master Files (DMFs) will be filed in the current financial year to meet the market needs.

 

During the year , the Company successfully started supplies to few Japanese Pharma Companies and business discussions are on with various companies for supply of new products and the Company is expected to make good progress on both business and regulatory fronts during the current year.

 

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER / YEAR ENDED 30  JUNE, 2012

Rs.in Millions

Particulars

 

 

THREE MONTHS ENDED

 

 

 

 

Net Sales/ Income from Operations

 

 

3156.315

1. (b) Other Operating Income

 

 

415.990

Total Income From operations

 

 

3572.305

2. Expenditure

 

 

 

a. Cost of Raw Materials consumed

 

 

1019.328

b. Purchases of stock in trade

 

 

153.832

c. Changes in inventories of finished goods , work in progress and stock in trade

 

 

720.414

d. Employee benefit expenses 

 

 

376.180

e. Depreciation and amortisation expense

 

 

399.126

f. Other Expenditure

 

 

744.446

Total Expenditure

 

 

3413.326

3. Profit from Operations before Other Income, Interest and Exceptional Items  (1-2)

 

 

158.979

4. Other Income

 

 

-

5. Profit before Interest and Tax 

 

 

158.979

6. Interest

 

 

713.259

7. Profit from Ordinary Activities before Tax  and exceptional items

 

 

(554.280)

8. Exceptional items

 

 

(80.804)

9. Profit from Ordinary Activities before Tax  but before exceptional items

 

 

(635.084)

10. Tax Expenses

 

 

(127.066)

11. Net profit/(loss) for the period

 

 

(508.018)

12. Paid-up Equity Share Capital (face value Rs.2 per share)

 

 

704.521

13. Reserves excluding revaluation reserve as per balance sheet of previous accounting year 

 

 

-

14. Earning Per Share

 

 

 

a. Basic and b. Diluted

 

 

(7.21)

15. Public shareholding

 

 

 

- No. of shares

 

 

47611295

- % of holding (to total shareholding)

 

 

67.58

Promoters And Promoter Group Shareholding

a) Pledged/ Encumbered

 

 

 

-Number of Shares

 

 

17110383

-% of Shares (As a % of the total Shareholding of Promoter and Promoter Group)

 

 

74.91

-% of Shares (as a % of the total share capital of the Company)

 

 

24.29

b) Non Encumbered

 

 

 

- Number of Shares

 

 

5730398

-% of Shares (As a % of the total Shareholding of Promoter and Promoter Group)

 

 

25.09

-% of Shares (as a % of the total share capital of the Company)

 

 

8.13

 

 

INVESTOR COMPLAINTS

30.06.2012

Pending at the beginning of the quarter

Nil

Received during the quarter 

3

Disposed if during the quarter

3

Remaining unresolved the end of the quarter

Nil

 

Note:

1.       The above unaudited financial results have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on August 14, 2012 and have been subjected to limited review by the Statutory Auditors in terms of Clause 41 of the Listing Agreement

 

2.       The Company is operating in single segment (i.e) "Pharmaceuticals".

 

3.       During the quarter, the Company formed a new subsidiary namely Orchid Pharma Singapore Private Limited in Singapore

 

4.       Exceptional items for the quarter ended June 30, 2012 represents exchange loss on FCCBs / FCTLs of Rs. 80.804 Millions (Corresponding quarter - Loss of Rs. 10.726 Millions). The Company had exercised the option provided under the Amendment to the Companies (Accounting Standards) Amendments Rules, 2006 dated March 31, 2009. The Ministry of Corporate Affairs vide notification dated 29th December 2011 has extended the amortisation of gains or losses arising on reporting of Foreign Currency Monetary items over the balance period of such long term asset / liability. Accordingly Exchange Loss on long term foreign currency loans have been amortised over the balance period of such loans. The amount remaining to be amortized in the financial statements as at June 30, 2012 on account of exercising the above option is Rs.1132.120 Millions (Corresponding quarter - Rs.Nil).

 

5.       The Allottment Committee of the Board has allotted 10,000 shares to an employee at an adjusted price of Rs.166.15 under Orchid - ESOP 2010 Scheme on May 17, 2012.

 

6.       Previous period figures have been regrouped wherever necessary.

 

 

 

 

PRESS RELEASE

 

Orchid Pharma enters into agreement to transfer its Penicillin & Penem API business & its API facilities in Aurangabad to Hospira for approximately US$ 200 million

 

Deal to help Orchid de-leverage its debt position and fund new growth plans

 

Chennai-based global pharma major, Orchid Chemicals and Pharmaceuticals (Orchid) today announced that it had entered into a Business Transfer Agreement (BTA) with Hospira for the sale and transfer of Orchid’s Penicillin and Penem API business and the API facility located in Aurangabad (Maharashtra) together with an associated Process R and D infrastructure located in Chennai for a total cash consideration of approximately US$ 200 million.

 

This business transfer includes the related Penicillin and Penem product portfolio and pipeline. Approximately 830 employees would be transferred to Hospira, as part of this business transfer.

 

As some of Orchid’s API requirements for the Non-penicillin, Non-Penem, Non-cephalosporin (NPNC) business were supplied by the Aurangabad facility, Hospira will supply such NPNC API to Orchid through a long-term agreement that both companies have entered into. This agreement builds on the existing product development and commercialization relationship between Hospira and Orchid.

 

Orchid would continue to supply its Cephalosporin APIs to Hospira in accordance with the long-term supply contract.

 

This business transfer agreement also demonstrates Orchid’s ability to build value in its chosen product domains and successfully monetize them to create value for the stakeholders.

 

The proceeds from this business transfer will be utilized for de-leveraging Orchid’s debt position and also pave the entry for the company’s foray into newer product verticals.

 

From the Chairman and Managing Director

“Orchid’s business model has crossed many milestones over the years. With investments across the pharma value chain ranging from research to API and FDF manufacturing, we have harnessed key product opportunities and built a strong revenue base. Moving on, we would like to replicate this success by creating more niche product and therapeutic verticals which will continue to power our growth. This business transfer agreement with Hospira will help us fast-track our future growth while maintaining a healthy debt profile in our balance sheet. Given the current scenario, it is a prudent decision for Orchid to monetize these verticals and bring in cash to de-leverage its debt position and fund newer growth horizons,” said Mr K Raghavendra Rao, Chairman and Managing Director, Orchid Chemicals and Pharmaceuticals Limited.

 

Transaction Details

The transaction has been unanimously approved by Hospira's and Orchid's boards of directors. It is subject to Orchid's shareholders, regulatory and legal approvals, as well as customary closing conditions. Assuming all necessary approvals are secured, the transaction is expected to be completed in the third quarter of Orchid’s 2012-13 fiscal year, corresponding to the fourth quarter of the calendar year 2012.

 

Advisors

Latham and Watkins LLP acted as the international legal advisor and Amarchand, Mangaldas and Co. acted as the Indian legal advisor to Orchid.

Orchid Pharma registers a turnover of Rs 4070 Millions in Q1 FY13

Chennai, India | August 14, 2012


Consolidated earnings for the first quarter ended June 30, 2012 (Q1 FY13)

Orchid registered a turnover of Rs 4067 Million for the quarter ended June 30, 2012 (Q1 FY13) in comparison to Rs 4492.300 Million registered during the corresponding first quarter of last fiscal. Earnings before Interest, Depreciation and Tax (EBIDTA) stood at Rs 541.100 Million during Q1 FY13 compared to Rs 906.900 Million registered during the corresponding quarter of last fiscal. At the net level, the Company registered a loss of Rs 540.200 Million compared to a profit of Rs 169.200 Million for the Q1 of last fiscal. 


From the Chairman and Managing Director


“Our performance during the first quarter of this financial year witnessed a slump both in our sales and profitability. Higher input costs coupled with lower price realizations in key products impacted the overall performance during the quarter. The additional interest burden on account of the External Commercial Borrowing (ECB) availed for the FCCB redemption has contributed to a higher interest outflow, adding to the negative bottom line. Our immediate focus in on consolidating our operations, optimising the product mix in key high-value markets, leveraging on the robust non-antibiotic product pipeline and de-leveraging our debt position. We foresee a flat year on the whole with pressure on profitability as we progress on this consolidation journey,” said Mr K Raghavendra Rao, Chairman and Managing Director, Orchid Chemicals and Pharmaceuticals Limited. 


Regulatory update


Orchid has been steadily increasing its regulatory filings with more focus on key, high-value products. These filings are expected to start yielding revenues as we move forward. 


API

Orchid’s cumulative filings of DMFs in the US stood at 89. Of these, 28 pertain to the Cephalosporin product space, 47 to the NPNC (Non-penicillin, Non-cephalosporin) segment, 2 to the Betalactam segment and 12 to the Carbapenem product segment.


Similarly, in the EU market, the cumulative filings of CoS (Certificate of Suitability) applications stood at 21 which includes 14 in Cephalosporin space, 6 in the NPNC space and 1 in the Betalactam segment.

Formulations

Filings

The cumulative filings of Abbreviated New Drug Applications (ANDA) in the US market stood at 43 which include 8 Para-IV FTF (First–To–File) applications. The company has already settled with the Innovators for 4 FTF products and these products will be launched as per the agreed terms. 


The break-up of the total ANDAs filed are 13 in Cephalosporin product segment and 30 in the NPNC product space. 


The cumulative count of Marketing Authorizations (MAs) filed in the EU market rose to 28. Of these, 13 filings pertain to the Cephalosporin products and 15 to the NPNC product space.


Approvals

The rate of ANDA approvals has been steadily increasing with the company receiving final approvals for key NPNC products like Naratriptan and Olanzapine. The final approved ANDAs count stood at 31, with 11 approvals pertaining to the Cephalosporin segment and 20 to the NPNC segment.



Similarly in the EU region, the cumulative approval count of Marketing Authorizations (MA) stood at 21. The break-up of the total MA approval count is 9 in the Cephalosporin space and 12 in the NPNC space.

 

CMT REPORT (Corruption, Money Laundering & Terrorism]

 

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

 

1]         INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

 

2]         Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

 

3]         Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

 

4]         Record on Financial Crime :

            Charges or conviction registered against subject:                                                              None

 

5]         Records on Violation of Anti-Corruption Laws :

            Charges or investigation registered against subject:                                                          None

 

6]         Records on Int’l Anti-Money Laundering Laws/Standards :

            Charges or investigation registered against subject:                                                          None

 

7]         Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

 

8]         Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

 

9]         Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

 

10]        Press Report :

            No press reports / filings exists on the subject.

 

CORPORATE GOVERNANCE

 

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

 

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

 

CONTRAVENTION

 

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

 

FOREIGN EXCHANGE RATES

 

Currency
Unit

Indian Rupees

US Dollar

1

Rs.53.97

UK Pound

1

Rs.87.52

Euro

1

Rs.70.84

 

 

INFORMATION DETAILS

 

 

Report Prepared by :

BYI

 

 

SCORE & RATING EXPLANATIONS

 

SCORE FACTORS

 

RANGE

POINTS

HISTORY

1~10

8

PAID-UP CAPITAL

1~10

7

OPERATING SCALE

1~10

7

FINANCIAL CONDITION

 

 

--BUSINESS SCALE

1~10

7

--PROFITABILIRY

1~10

6

--LIQUIDITY

1~10

7

--LEVERAGE

1~10

7

--RESERVES

1~10

7

--CREDIT LINES

1~10

6

--MARGINS

-5~5

-

DEMERIT POINTS

 

 

--BANK CHARGES

YES/NO

YES

--LITIGATION

YES/NO

YES

--OTHER ADVERSE INFORMATION

YES/NO

NO

MERIT POINTS

 

 

--SOLE DISTRIBUTORSHIP

YES/NO

NO

--EXPORT ACTIVITIES

YES/NO

NO

--AFFILIATION

YES/NO

YES

--LISTED

YES/NO

YES

--OTHER MERIT FACTORS

YES/NO

YES

TOTAL

 

62

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)            Ownership background (20%)                 Payment record (10%)

Credit history (10%)                    Market trend (10%)                                Operational size (10%)

 

 

RATING EXPLANATIONS

 

 

RATING

STATUS

 

 

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

 

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

 

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

 

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

 

Satisfactory

26-40

B

Capability to overcome financial difficulties seems comparatively below average.

 

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

 

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

 

 

Credit not recommended

-

NB

                                       New Business

-

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.