The resolution plan of Gurgaon-based Dhanuka Laboratories for the revival of Chennai-based debt-ridden Orchid Pharma Ltd has been implemented, potentially fetching secured lenders around 32.3 per cent recovery. In addition, the secured lenders will also receive around 4,08,164 equity shares at an issue price of Rs 10 each for part of their debt.
Orchid Pharma’s regulatory filing on Tuesday said the paid-up equity share capital of the company has been reduced from Rs 88.96 crore to Rs Rs 40.81 crore, with cancellation of 88.56 million equity shares of Rs 10 each. A meeting of the Monitoring Committee held this week also approved issue of zero per cent non-convertible, non-marketable, cumulative redeemable debentures of value of Rs 3,650 crore to Dhanuka Pharmaceuticals Pvt Ltd – a Special Purpose Vehicle formed by Dhanuka Laboratories Ltd – for subsuming equivalent outstanding debt of Orchid Pharma by the SPV for consideration other than cash.
The lenders were able to recover around Rs 1,106.50 crore out of the total admitted debt of around Rs 3,526.74 crore, apart from the one per cent shares. Dhanuka will hold around 98 per cent shares following the deal and may have to look for dilution of shares as per the relevant regulation.
“We were able to complete the process within the timelimit despite the lockdown restricting the movement. The documentation has been done digitally, through Aadhar enabled digital signatures on Leegality.com platform, so that we complete the transaction on or before March 31. We had to complete in 30 days from the date of order and we have put all our efforts to comply this,” said S V Ramkumar, resolution professional and monitoring agent of the company.
The 4,08,164 equity shares are issued to 22 secured financial creditors depending upon their exposure in the company, and State Bank of India will get 72,915 equity shares, while Bank of India will get 41,228 shares and Union Bank of India and Allahabad Bank will receive around 28,000-29,000 shares each.
It may be noted that this is the culmination of the long-drawn resolution process for the pharmaceutical company, which saw its first National Company Law Tribunal (NCLT) approved resolution plan, by US-based Ingen Capital, annulled due to non payment of required amount. NCLT, annulling the resolution plan, allowed the Resolution Professional to go for another round of resolution process. In the second attempt, the Committee of Creditors has approved the proposal of Dhanuka Laboratories, following which an unsuccessful bidder Accord Life Spec approached NCLT against the CoC’s decision.
While Accord Life Spec argued that Dhanuka’s bid was below liquidation value, the NCLT, in its order in June, 2019, noticed that according to the resolution professional’s explanation, while Dhanuka’s resolution plan value was Rs 570 crore, which is lower than the liquidation value of Rs 1,309 crore, Orchid Pharma had a cash and bank balance of Rs 321.98 crore.
This and some other factors brought the plan value to around Rs 1,147.78 crore, close to the liquidation value. Accord’s bid was also below the liquidation value. Accord approached the National Company Law Appellate Tribunal (NCLAT), which set aside the NCLT decision and remanded the matter back to the Tribunal. SBI, one of the major lender, approached the Supreme Court.
The Supreme Court division bench comprising of Justice Rohinton Fali Nariman and Justice S Ravindra Bhat, observed that the NCLAT’s judgement has to be set aside in view of a recent Judgement where it was categorically held that no provision in the Insolvency and Bankruptcy Code or Regulations are brought to the Court’s notice, under which the bid of any resolution applicant has to match liquidation value arrived at in the manner provided in the relevant regulations.