Chennai floods hit Orchid plans

Orchid Pharma (OPL) has entered into an agreement with the UK's Line Trust International to procure a loan of up to USD 800 million (about Rs 5280 crore). The loan arrangement was made through its wholly-owned subsidiary Orchid Europe. According to a company communique, raised fund will help OPL to explore inorganic development growth in near term. New business initiatives will also help the company to achieve incremental value.

In terms of organic development growth, OPL is coming up with a new sterile Active Pharmaceutical Ingredient (API) plant for cephalosporins at Chennai. The company is expected to complete the construction of the facility during the current fiscal year. Unfortunately, due to heavy rain and subsequent floods taking a toll on the industrial activities in Chennai, the plan to make plant operational now may get delayed.

OPL is in the development, manufacture and marketing of bulk actives, formulations and nutraceuticals. Company's pharmaceutical solutions include active pharmaceutical ingredients (API), finished dosage forms, new drug discovery (NDD), novel drug delivery systems (NDDS) and contract research and manufacturing services (CRAMS). It has two API facilities, three formulation manufacturing sites and three research campuses in India.

During the second quarter of the current financial year, OPL was also in talks with banks to convert rupee debt to dollar denominated. Out of its total debt of Rs 3211 crore, the company has Rs 1869 crore rupee loan, Rs 715 crore came from foreign currency loan and remaining working capital loan as of FY15. According to a company communication, it is presently going through a corporate debt restructuring (CDR) process. In March 2014, OPL received approval for CDR package. At present, the company's rupee loan costs 11 per cent and foreign currency loan has a bearing of interest rate at 4.6 per cent. So, conversion of rupee loan into dollar term would enable OPL to gain on lesser rate of interest rate.

On the financial front, OPL's cash and cash equivalent stood at Rs 391 crore in FY15.  After fund raising its total debt will be Rs 8491 crore. The company's EBITDA to debt ratio is almost nine times as of FY15. Further increment in debt may impact OPL's  bottomline until any new strategic acquisition takes place .

Share price of OPL has increased by 4.73 per cent on bourses in early trades and is trading at Rs 62.95 on an intra-day basis. Share prices were very volatile during last one year owing to its declining financials. However sources in the markets believe OPL management is confident and expecting to break even in current financial year.