Exactly two years back, K Raghavendra Rao, the promoter of Orchid Chemicals and Fertilisers, almost lost his company because he couldn’t buy back shares pledged with Indiabulls Financial and Religare Securities.
The lesson seems to have been lost because data show Rao, his wife and daughter, who have 25% stake in the company, have again pledged 80% of it to raise funds.
“Yes, the fresh pledge is at about 80% of our holding in the company. But, it will come down in the first quarter of the next financial year,” Rao told DNA on Tuesday.
The Raos had floated an investment vehicle — Orchid Healthcare — to carry out a creeping acquisition of further equity in the company.
Orchid Chemicals has a paid-up capital of 7.04 crore shares of which the promoters hold about 1.76 crore shares.
While refused to divulge the money raised through pledging, back-of-envelope calculations show it could be around Rs 150-200 crore, considering 1.41 crore shares were pledged, a six-month average price of the Orchid share at around Rs 175, and considering that banks give only 50%-60% of value of shares as loans.
The Orchid share has lost 31% since mid-December, after US-based pharma firm Hospira bought its crucial injectables business for $400 million.
“The funds would not go to the promoters. They will be used to retire the company’s debt,” a company spokesman said.
Rao is currently engaged in raising funds from additional sources to get the pledge released.
“We can’t wait for the additional funds to come in since we will lose the advantage of hitting the legitimate threshold of 5% creeping acquisition limit this year (they have bought 4.3% till date this year). If we do it past March, it would come into the account of next year,” he said.
In April 2008, Indiabulls and Religare had offloaded Rao’s pledged shares following margin calls.
When the bulk sales happened, Rao faced the threat of a takeover because the buyer, Solrex Pharmaceutical Company was an investment company owned by Ranbaxy Laboratories.
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