Wockhardt confident of Danone deal success

Allaying fears of creditors holding up its €250 million sale of nutrition business to French food products multinational Groupe Danone, management of Indian drug maker Wockhardt hinted at the possibility of paying off the outstanding liability of Rs300 crore.

“What do we have to do? Pay the money, right?” asked Habil Khorakiwala, promoter and chairman of the company. “And it is only Rs300 crore. Then there is no dispute,” he added implying that the outstanding debt amount is not part of the credit restructuring (CDR) plan that the company entered into a few months ago.

The sale of its nutrition business to Danone would bring in about Rs1,600 crore, giving Wockhardt enough liquid cash to settle the dispute with lenders who could influence the court to hold up the deal until there is a guarantee that their money is paid off.

Two years ago Wockhardt had entered into an agreement with Abbott Labs for sale of the nutrition business for about Rs640 crore, but it wasn’t concluded amidst fears of lenders throwing a spanner in the works.

Wockhardt is seeking court’s permission for going ahead with the deal and is confident that it would be able to conclude the transition before the end of current fiscal.

Wockhardt’s trouble with lenders goes back to the $110 million worth of Foreign Currency Convertible Bonds that the company issued in 2004, which came up for redemption in 2009. At the time of redemption, the bonds were worth about $140 million, or about Rs486 per share, if converted to equity.

However, Wockhardt shares were trading at around Rs180 then, making conversion to shares meaningless and forcing the company to seek debt restructuring. Some bond holders, representing about $73 million, or nearly Rs300 crore, refused to be part of the agreement to restructure debt and went to court seeking liquidation of the company to recover their loans.

However, raising the stakes, the Khorakiwala family has filed a defamation suit against the lenders who sought company liquidation and is seeking Rs930 crore in damages. The liquidation petition filed by lenders in the Bombay High Court made “certain false allegations against me personally,” according to Khorakiwala, which affected the reputation and brand that he has built over the last 40 years.

Wockhardt, which also announced its first quarter results, is back in the black with profits of about Rs194 crore, as against Rs116 crore losses during the same period last year. The company reported a 14.3% growth in its sales to Rs1,052 crore, making the just concluded quarter the first time when company crossed Rs1,000 crore in sales.