Maneesh Pharmaceuticals, the Mumbai-based mid-sized company, is in final stages of talks with private equity firms to raise funds in the region of Rs 100 crore to Rs 125 crore, sources familiar with the development told VCCircle. The company is expected to close the deal in a month’s time. The PE funds will be utilised for expanding pharma branded generics and promotion of FMHG brands like SMYLE range of products.
The company is now going full steam ahead with PE fund-raising plans following its recent amicable settlement with Royal Bank of Scotland over outstanding loan dues. When contacted, Vinay Sapte, managing director, Maneesh Pharma told VCCircle, “The private equity proposals are in advance stage of deciding the terms, amount and other related negotiations.”
Mr Sapte further said, on the settlement with the bank, “RBS has accepted our request to reduce the interest and we have reached an amicable settlement to pay their dues.” When contacted, an RBS spokesperson did not comment on the settlement.
The company and the bank have reached amicable settlement as RBS agreed to reduce the interest for the pending payments. In April, VCCircle reported about the proposed winding up petition, which ABN AMRO Bank NV (now The Royal Bank of Scotland NV) was planning to file against the Rs 800-crore Maneesh, on account of outstanding loan dues.
According to sources, the interest on the working capital has now been reduced to 9.5% and on the derivative crystallization loan to 10%. As per the settlement between the bank and Maneesh reached on June 7, 2010, the derivative loss of Rs 11.9 crore is converted into loan and will be paid in 36 EMI starting from November 2010. The company started paying the overdue interest from August 2009 till May 2010 and routing turnover of Rs 1 crore per month from July 10 onwards.
According to the documents, working capital facility of Rs 45 crore will be secured by first pari-passu charge (gives a parallel proportionate right to the lenders) with other participating multiple bankers on the current assets of the company and moveable fixed assets of the company except moveable fixed assets located at Baddi and Bombay Bio-Syntex. Total exposure of Rs 56.93 crore will be secured by personal guarantee of Vinay Sapte and corporate guarantee of Svizera Labs Pvt. Ltd.
The genesis of the issue was in April 2008 when Maneesh Pharma had taken a loan facility from ABN Amro at 9.5% to augment its working capital. Later, in August, as ABN Amro offered to convert the same to foreign currency non-resident (FCNR) offering at a better interest rate, Maneesh is learnt to have opted for the same when the bank is understood to have agreed to give a forward cover to hedge against currency fluctuations. ABN AMRO, however, subsequently refused to extend the forward cover, though it was part of the agreement. When the loan matured after three months, the currency took a tumble and Maneesh had to book a loss of almost Rs 6 crore.
It is learnt that ABN AMRO started charging an interest at 23%. The over-due interest amounted to Rs 12 crore in addition to the Rs 45-crore principal amount. The company had to dispute the liability and ask the bank to negotiate for settlement of the dispute by converting the accumulated interest amounting to Rs 12 crore into working capital demand loan (WCDL) payable in 36 equal installments. After paying down-payment of Rs 1.5 crore, the bank is learnt to have come up with a revised term sheet asking for additional guarantee by directors and also corporate guarantee by sister concerns for Rs 12 crore, which the company did not agree to and went under dispute.
Maneesh had acquired the Smyle range of over-the-counter (OTC) products from Kopran Pharma two years back. It had also proposed an initial public offer (IPO) to raise about Rs 500 crore. Maneesh Pharmaceuticals has presence through joint ventures and subsidiaries in more than 70 countries across Africa, South America, Europe, Middle East, and the Asian Continents It has marketing presence in the Indian market through its two marketing arms, Svizera Healthcare and Maneesh Healthcare. Both these divisions together have a strength of over 1,000 medical representatives.