Chennai-based pharma major Orchid Chemicals & Pharmaceuticals? corporate debt restructuring (CDR) process has hit a road-block. Billionaire industrialist Cyrus Poonawalla and his associate firms, which hold around 14% stake in the company, have moved the Company Law Board (CLB) and Madras High Court seeking quashing of implementation of the CDR package until their petition on mismanagement of company affairs is disposed of by CLB.
Under the CDR plan cleared in March, Orchid will undertake divestment and transfer its active pharma ingredients (API) business along with the manufacturing plants and an attached research and development facility located in Aurangabad, to repay part of the R3,457-crore debt.
After hearing both Poonawalla and Orchid counsels, the high court has directed the CLB’s southern bench to consider afresh both the petitions ? on mismanagement of affairs and on granting stay on CDR implementation.
Earlier, Poonawalla had moved CLB with a petition alleging certain acts of oppression and mismanagement in the affairs of Orchid Chemicals and sought injunction to halt the CDR process until these issues were addressed. However, the CLB dismissed the plea for stay and adjourned further hearing to April 30. Following this, Poonawalla approached the high court against the CLB order.
The court has now asked CLB to hear and dispose of the matter on April 25, citing urgency of the issue.
Justice KK Sasidharan said: ?The CLB is directed to dispose (of) the interlocutory application in company petition purely on merits and as per law without in any way being influenced by the observation made in its order dated March 24. It is also made clear that this order is made without prejudice to the contentions taken by the appellants and the defence taken by the respondents (Orchid), including the question regarding maintainability of the very company application filed before the CLB.?
Orchid and a clutch of banks involved in the CDR package have opposed the petition at the CLB, raising substantial contentions, even with regard to its maintainability. ?The CDR approval will facilitate the completion and transfer of the API business to Hospira and will bring in working capital availability from sale proceeds besides deleveraging the debt profile,? Orchid CMD K Raghavendra Rao said in a statement to stock exchanges at the time of receiving the CDR-empowered group?s nod.
The Pune-based Poonawalla group of Cyrus Poonawalla started investing in Orchid Chemicals way back in 2008 at a time when pharma major Ranbaxy attempted a hostile takeover, acquiring over 14% stake over a period of time.
Poonawalla group company Adurjee & Bros had accumulated a 7.22% stake in Orchid through open market transactions with Serum Institute of India, Chakan Investment and Fortune Interncontinental as persons acting in concert (PACs) for Adurjee & Bros. Over the years, they scaled up the holding to 14%.