Frantic Orchid promoter hunts for a white knight

On Tuesday, Orchid Pharmaceuticals promoter Kailasam Raghavendra Rao was desperately seeking a white knight to bail him out of his current predicament.

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“We have been calling up all the major investors, and they are with the company. We are in a safe position,” an Orchid spokesperson told DNA Money.

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The Life Insurance Corporation of India is a major investor, holding 8% stake in the Chennai-based cephalosporin manufacturer. Of this, 2.5% were acquired in the last three months.

Orchid is also talking to foreign portfolio funds who are not only willing to invest in the company, but also pick up shares from the secondary market.

The company will call for a board meeting very soon, sources said, to apprise the directors of the situation.

Meantime, scuttlebutt is that the prey (Rao) and the predator (Ranbaxy representatives) met on Tuesday, trying to thrash out matters.

Orchid officials, however, denied the meeting.

Ranbaxy officials were not available for comment.

But all that did not stop the Delhi-based pharma giant’s investment firms led by Solrex Pharmaceuticals from hiking stake in Orchid by another 1.48% to 12.87%.

On Tuesday, a sheaf of block deals were struck in the share. As a result of the hullabaloo, the Orchid share gained 15.53% or Rs 32.80 to end at Rs 239.95 in the BSE.

“At the most they (Ranbaxy-linked unit Solrex Pharmaceuticals) can go up to 15%, after that, they (Solrex) will have to either stop their market operations or they will be forced to make an open offer,” L. Chandrasekar, company secretary, Orchid, said.

For Ranbaxy, the acquisition of Orchid makes sense as the missing link in its portfolio is a cephalosporin manufacturing unit, said an analyst, who did not wish to be identified.

The promoters of Orchid, on the other hand, have been aggressively raising funds to build capacities.

The company has a debt of $220 million dollars or roughly Rs 900 crore, apart from another $200 million in convertible bonds.

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Orchid promoters saw their stakes fall 7.9% on March 17 after lenders to whom shares were pledged sold them when the owners couldn’t meet margin calls from the lenders. The promoter is said to have lost Rs 75 crore in the selloff when the shares lost 40%. It subsequently recovered. They now hold only 17%, making them vulnerable to a hostile takeover.

Under license from www.3dsyndication.com

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