Orchid owners have option to convert warrants to equity
The founders of Orchid Chemicals & Pharmaceuticals Ltd have the option to convert 5 million warrants to 7.6 per cent of additional equity, founder and Managing Director Raghavendra Rao said on Wednesday.
“Yes, I have warrants,” Rao said over the telephone. “That converted into shares will mean 7.6 per cent.” The promoters had paid 10 per cent of the conversion price up front, he said.
The drugmaker’s shares have risen by a third in two days on news Solrex Pharmaceuticals has raised its stake in Orchid to 11.4 percent, amid speculation the acquirer was part of larger rival Ranbaxy Laboratories Ltd.
However, there has not been any confirmation from either Ranbaxy or Orchid connecting privately-held Solrex to Ranbaxy. A Ranbaxy spokesman said the company did not believe in hostile takeovers. He declined to comment specifically on Solrex acquisition of Orchid shares.
Orchid shares fell as much as 11.65 per cent to Rs 212 while Ranbaxy was 1.2 per cent lower at Rs 465 in a firm Mumbai market.
The warrants, which were allotted last March, are convertible at Rs 202.58 each within 18 months of allotment, according to data from the stock exchange.
Rao and his family will have to pay about Rs 913 million to affect this conversion, but there was no specific idea about how they would raise this amount, he said.
Orchid’s promoters stake dropped by 7.9 per cent to 15.9 per cent last month after lenders to whom the shares were pledged sold them when the owners could not meet the margin calls from the lenders.
The shares, which slumped to a near-four-and-a-half-year low following the sale, have risen, boosted by the Solrex acquisition from the open market. If Solrex acquires 15 per cent stake in Orchid, under existing rules, it will have to make an open offer for an additional 20 per cent of the company’s shareholding
