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Wockhardt To Restructure, Khorakiwala Quits As MD

01 April, 2009

Drugmaker Wockhardt Ltd will undertake a recasting of its business units, go in for a corporate debt restructuring exercise and also see a change at the top leadership team. The company on Tuesday announced that its Managing Director Habil Khorakiwala will step down from the post paving the way for the generation next in the group.

His younger son Murtaza Khorakiwala is taking over as the new managing director, while elder son Huzaifa will remain as a whole-time director.. 

The company said in a statement that it has approached the corporate debt restructuring cell of ICICI Bank for the recast of its debt which stood at Rs 3,777 crore as of December 31, 2008.

“In view of the adverse market conditions, liquidity constraints and debt burden, the board has decided to make a reference to (the) corporate debt restructuring cell for financial restructuring of the debts of the company,” Wockhardt said in the statement.

report in the Economic Times says that the biggest problem Wockhardt has at its hand is to offset $300 million of forex derivative losses within 6 months. Adding to its woes, it also has to pay around $140 million to redeem FCCBs and as interest by September. 

The daily also reported that Wockhardt founders may sell a majority stake in unlisted Wockhardt Hospitals in a deal valuing the firm at about Rs 1,000 crore, driving the drugmaker’s shares up 7.1 percent in a firm Mumbai market.

The announcement prompted Religare Capital Markets analyst Vikas Sonawale to downgrade the stock to ‘sell’ from ‘buy,’ citing uncertainties of the future financials of the company.

“The bankers will influence the decision making of Wockhardt. It will change the company’s investment plans, dividend policies, etc,” Sonawale wrote in the report.

As a result of the evaluation of restructuring options, the accounts of the company could not be audited on schedule and had therefore postponed reporting of its results to April, the company said in a statement to the stock exchanges.

Downgrades

Last month, ratings agency CRISIL downgraded its rating on Wockhardt’s pass through certificates that are backed by loan receivables citing continued strain on the financial risk profile and liquidity of the drug maker.

As of December 31, Wockhardt had Rs 3,777 crore of debt, CRISIL said, adding the company would have to repay Rs 2,370 crore in two years, with about Rs 1,324 crore coming up for repayment in calendar year 2009.

Last week, Fitch Ratings too lowered its rating on Wockhardt’s debt and said the refinancing of its $140 million foreign currency convertible bonds falling due in September 2009 was a key concern.

Indian newspapers and television channels have been reporting on likely sales of one or other assets of the Mumbai-based drug maker, including a pharma unit, land and brands.

Pfizer Inc  and Sanofi-Aventis were also reported to be in the race to acquire a stake in the Indian firm’s biotechnology business.

The company has been exploring options to raise funds through stake sale to private equity firms, industry officials said.

Wockhardt shares, which saw three-fourths of its value eroded in 2008, fell another 21 percent this year, far worse than the 4.6 percent fall in the BSE healthcare index in 2009.

Wockhardt, whose financial year ends Dec. 31, is required by the regulator to report its annual results within 90 days after the year-end. Now it expects to complete the audit by April 25 and report results thereafter, the company said in the statement.


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Wockhardt To Restructure, Khorakiwala Quits As MD

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