startups

Wockhardt plans to demerge its formulations business, dilute stake – ETtech.com


Wockhardt plans to demerge its formulations business, dilute stakeWockhardt Ltd, one of India’s oldest drug makers, plans to demerge its India formulations business and sell a significant minority stake as a last attempt to repay its mounting debt, multiple people aware of the development said.

Wockhardt’s promoter Habil Khorakiwala is looking for a valuation of ₹5,000 crore, or 4 times of the domestic formulations revenue, said the first person aware of the development.

It is learnt that Khorakiwala has discussed the new plan with lenders where a 25-30% stake will be diluted if the plans get materialised. The company has a total debt of ₹3,737 crore as on March 31, 2018.

At present, Khorakiwala himself is engaged in negotiations with a clutch of PE funds, though the management plans to rope in an investment bank. Mails sent to Wockhardt spokesperson did not elicit any response till press time.

Promoters have already sent feelers to a few bulge bracket private equity funds like Bain, KKR, Carlyle, Advent and ChrysCapital.

As per the latest plan, the domestic formulations business of Wockhardt will be demerged as a sepearated entity and a significant stake to be diluted, the second person said.

PE fund managers declined to comment. Annual sales of pharmaceuticals business (API& formulations) of Wockhardt from domestic market for FY18 stood at Rs 1,496 crore where formulation sales comes about ₹1,250 crore. India business de-grew by 1% in FY18.

“Since the debt repayment deadline is up, the company is now looking at launching a formal sale process and will appoint an investment banker soon,” said one of the persons cited above.

However, the sale process may not be easy for the promoters.

“There are many hurdles for carving out a major part of the business, and getting it approved,” said another PE fund manager who had been approached by Wockhardt promoters. Valuation is also another concern, he added. “Besides valuation, none of the global PE funds are keen for a minority stake in Wockhardt, though the business is doing good,” he added.

The company is also exploring debt funding from KKR and some other sources. Whatever strikes first and gives them the best value, the company will choose that option.

In India, Wockhardt has a diversified product portfolio with a strong presence in major therapeutic segments such as cardiology, dermatology, diabetes, respiratory and ophthalmology. During FY18, the company launched 12 new products in India.

The company has a total debt of ₹3,737 crore as on March 31, 2018, where secured loans at ₹3,391 crore and preferential share capital worth ₹340 crore. The current market cap of Wockhardt is ₹4,897 crore.

Promoters of Wockhardt Ltd has been trying to raise money through various ways to repay its increasing debt. Last year, Wockhardt had hired bankers to raise dollar bonds worth $300 million, which didn’t materialise.

The Habil Khorakiwala-promoted Wockhardt Hospitals also plans to sell four of its seven residual hospitals located outside Mumbai – in Nagpur, Nashik and Rajkot. In 2009, Khorakiwala sold 10 of its Wockhardt hospital chains in Mumbai, Bengaluru and Kolkata for ₹909 crore to Fortis Healthcare.

In FY18, it clocked a loss of ₹608 crore on total income of ₹3,937 crore.

International business contributed 62% of the total revenue in FY18 while revenue from India contributes 38% of total revenue. For thirdquarter in FY19, the India business fell about 7% at Rs 363 crore against ₹392 crore in Q3FY18.

Wockhardt plans to demerge its formulations business, dilute stake



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.