Core Healthcares Fate Hangs In Balance

Ahmedabad, Sept 2 | Updated: Sep 3 2004, 05:30am hrs
The hype and hoopla about selling off sticky assets notwithstanding, the Asset Reconstruction Company of India Limited (ARCIL) is still trying to secure the mandatory 75 per cent consensual agreement from lenders to the ailing Ahmedabad-based Core Healthcare Limited (CHL) for selling off the companys assets.

This is despite the fact that over a year and half has lapsed since a notice under section 13 II of the Securitisation Act was slapped on CHL, giving the company 60 days to repay its outstanding loans failing which its assets would be taken over. What is worse, the delay may cool the interest, which at least three serious bidders including the worlds leading hospital care players specializing in large volume parentals and injectibles namely German multinational Freznus and the US-based Baxter and domestic pharma major Cadila Pharmaceuticals, have evinced in buying out the large volume parenterals and medical devices business of CHL, still a leading player in the countrys LVP business with a 30 per cent share in the IV fluids business.

It is reliably learnt that the three companies have already indicated their expression of interest in CHL and have conducted due diligence of CHLs still functional assets at their Sachana-based manufacturing facility over the past few months. While three to four other players in the pharma sector including small players in the LVP business have also visited the facility, they are not being counted among the serious bidders. Confidential sources maintained that the offers given by the three serious bidders range between Rs 250-350 crore.

What is perplexing industry watchers however, is ARCILs inability to secure the mandatory 75 per cent consensus among the 20 lender banks and financial institutions which include, among others, the three main promoters of ARCIL namely ICICI, IDBI and the State Bank of India (SBI). While SBI, ICICI and IDBI which are the largest lenders of CHL have accorded their consent, it is some among the other lenders including UTI, Dena Bank, State Bank of Travancore, State Bank of Mysore, foreign banks including Citibank and some financial institutions which are still to give their consent.

What Next

The delay may cool the interest, which at least three serious bidders including German multinational Freznus, US-based Baxter and domestic pharma major Cadila Pharmaceuticals, have evinced in buying out the large volume parentals and medical devices business of Core Healthcare

Interestingly, while promoters of sick companies are usually blamed for coming in the way of disposition of assets, CHL is a classic case where despite the total consent and cooperation of the promoters, it is ARCIL which has thus far failed to get the mandatory consensus required for sale of assets of CHL. What should have been an open and shut case is getting delayed needlessly, said a banker on condition of anonymity.

In the meantime, market watchers say that the longer it takes for ARCIL to dispose off the assets, the more their value will come down. It may be recalled that while CHL had got an offer of around Rs 70 crore for their 40 MW captive power plant from a leading corporate way back in 1998 following a debt restructuring exercise and another Rs 14 crore offer for their pharma business facility which manufactured capsules and syrups, no action was taken by the lenders to secure a better sale offer for these units.

At present, it is reliably learnt that ARCIL has got an offer of around Rs 20 crore for the power plant and a paltry Rs 2 crore offer for its pharma business. Unless steps are taken to dispose of the assets, ARCIL will finally have to resort to distress sale, warned a banking industry source.