PE funds, domestic pharma companies eye Orchid Pharma under IBC

Two months after a National Company Law Tribunal (NCLT) issued an order initiating corporate insolvency proceedings against debt-ridden Orchid Pharma, numerous potential suitors, including top private equity players and domestic peers are eyeing the Chennai based company as part of a resolution plan under the provisions of the insolvency and bankruptcy code, multiple sources familiar with ongoing negotiations told ET NOW on the condition of anonymity.

"The resolution talks are at an early stage and the committee of creditors recently held their first meeting on October 3rd. There is considerable interest in the company amongst both private equity funds and strategic domestic players and the likes of KKR, the distressed asset platform of Piramal Enterprises & Bain Capital, Lupin & Aurobindo Pharma are amongst the potential suitors which have expressed preliminary interest in the process. More suitors may join the race in the coming days ," according to two of the sources cited above.

In August, the NCLT Chennai had given the nod for insolvency proceedings against the company based on a plea filed by one of the lenders, Lakshmi Vilas Bank. The company has a debt exposure of around Rs 3500 crores to the lenders consortium led by SBI. EY has been appointed as the resolution professional by the committe of creditors, sources added.

" Prospective suitors are keenly evaluating their strategy regarding Orchid Pharma as both the API and formulations plants of Orchid Pharma are approved by the US FDA indicating export potential and the company also has 70-80 approved ANDA's ( abbreviated new drug applications) ," added a third source.

The manufacturing facilities are also approved by other regulators and agencies like the UK MHRA, EDQM, DMA, MCC and TGA. According to the company's 2016-2017 annual report, the company is involved in the development, manufacture and marketing of diverse bulk actives, formulations and nutraceuticals with exports spanning over 40 countries. During the year ended on March 31, 2017, Orchid Pharma delivered an EBITDA of `111.56 crores (15 percent of operating revenues) as against `198.66 crores (23 percent of the operating revenues) during the previous year ending on March 31, 2016.

In response to email queries from ET NOW, KKR, Piramal Group & Lupin declined to comment on "speculation". EY declined to comment while ET NOW is awaiting email responses from Orchid Pharma & Aurobindo Pharma.

Under the insolvency and bankruptcy code, the creditors along with the resolution professional have to invite and finalise resolution or revival plans from interested bidders, buyers and even the promoters within 270 days, failing which the assets of the company would be put up for liquidation.