Three pharma firms in second race for Orchid Pharma resolution process

There are three pharmaceutical bidders for debt-ridden Orchid Pharma Ltd in the second round of Corporate Insolvency Resolution Process (CIRP) -- Gurgaon-based Dhanuka Laboratories, Chennai-based Accord Life Spec and Hyderabad-based Covalent Laboratories -- and the one with the highest bid might get a nod from the bankers for the resolution plan.

According to sources close to the process, while Dhanuka Laboratories is expected to have an edge over the others, the Chennai-based Accord Life Spec and Covalent Laboratories are also in the race. The Committee of Creditors (CoC) will submit its decision on the highest bidder with the National Company Law Tribunal (NCLT), for final approval.

Dhanuka La is a prominent manufacturer and exporter of Oral cephalosporin APIs, an area in which Orchid Pharma is strong. Covalent also specialises in manufacturing Cephalosporins and its intermediates and the synergy for the company to have Orchid's manufacturing facilities and other capabilities is good, said experts.

Accord Life Spec is a part of Accord Group, which has diversified interests in medical education, technical universities, hospitals, breweries and hotels. The company is a player in speciality segments such as generics and formulations for oncology and other therapeutic applications. According to sources, however, the highest bid this time would see a larger haircut compared to Rs 1,490 crore offer submitted by the previous bidder Ingen Capital. A consortium of 24 banks has lent a total of over Rs 3,200 crore to Orchid.

Orchid Pharma Ltd is making a second attempt to find a resolution plan under the CIRP, as the previous resolution plan by US-based Ingen Capital LLC was annulled by the NCLT after the American firm failed to remit the upfront payment as per the norms. Ingen Capital's resolution plan was approved by NCLT on September 17, 2018, and as per the approved Resolution Plan, it was to deposit Rs 1,000 crore upfront to the financial creditors. But it sought more information, which the Resolution Professional didn't allow.

The NCLT, on February 28, annulled Ingen's resolution plan and allowed 105 days for Corporate Insolvency Resolution Process (CIRP) considering the time lost from the date of previous expression of interest, November 16, 2017, to the date of annulment of the approved resolution plan of Ingen Capital. It has also reinstated the RP and the Committee of Creditors (CoC) to ensure the running of the company as a going concern.

The National Company Law Appellate Tribunal (NCLAT) later directed the Central Government to take action against Ingen, its managing director and other members of its board for not implementing its resolution plan. It also imposed a cost of Rs 10 lakh on Ingen to be paid to the CoC within 30 days.

Orchid Pharma says closer to resolution as RP has received three plans

Orchid Pharma Ltd is one step closer to finalising its second attempt to find a resolution plan under the Corporate Insolvency Resoltuion Process (CIRP) it initiated earlier, as the Resoltuion Professional (RP) received three resolution plans as on May 17, 2019.

The National Company Law Tribunal (NCLT) had earlier cancelled the resolution plan by US-based Ingen Capital after it refused to infuse the upfront amount, seeking certain data from the pharmaceutical company.

According to a company filing with the exchanges, Orchid Pharma has said that the RP has received three resolution plans from prospective resolution applicants as on May 17, 2019.

Resolution plans were invitied on April 10, as per the order from NcLT on February 28, 2019, and the last date of submission of the plans was on May 10, which was later extended to May 17.

The RP will evaluate the resolution plans now and the compliant ones would be placed before the Committee of Creditors (CoC), which is expected to meet late this week or early next week to take it forward. As per the timeline fixed by the NCLT, the 105 days' time allowed by the Tribunal to conclude the selection of resolution plan will end on June 13.

Earlier during the month, the company had said the potential investors have urged the RP to share the provisional financials of the company for 2018-19, before submission of resolution plan.

The RP responded stating that the statutory audit for FY19 would not be completed before the due date for submission of resolution plans as the audit is for the full financial year.

As Orchid Pharma is a listed entity and the details sought for are price sensitive, the RP informed CoC that the financial information requested would also be uploaded in the website of the company, he added.

The RP refused to comment on the investors who have submitted the resolution plan now. Earlier in a submission with the NCLT, related to the non-payment of upfront amount by Ingen Capital, the RP has said he had received e-mails from Divi's Laboratories Ltd, Gland Celsus Biochemicals Pvt Ltd and Fidelity Trading Corporation and oral enquiries from ART Capital (India) Pvt Ltd, Everstone Group, Aion Capital, Piramal Capital and Finquest Group expressing interest in proposing Resolution Plans.

Recently, the National Company Law Appellate Tribunal has directed the Central Government to take action against US-based investor Ingen Capital Group LLC, its managing director and other directors for not implementing its resolution plan for Chennai-based Orchid Pharma after its proposal being selected by the Committee of Creditors (CoC) and National Company Law Tribunal (NCLT) for implementation. The action comes on an appeal filed by Ingen Capital against the Resolution Professional (RP) earlier with the Appellate Tribunal.

The Appellate Tribunal directed the Central Government through the Ministry of Corporate Affairs to take appropriate steps aainst Ingen Capital Group and its Managing Director and other Directors who tried to take advantage of ths resolution process but later on failed to implement its proposal without any basis and imposed a cost of Rs 10 lakh on Ingen Capital to be paid in favour of CoC within 30 days.

The Bench observed that while earlier it was given opportunity to deposit the upfront amount but Ingen Capital failed to deposit the same.

Ingen Capital approached the NCLAT with an appeal assailing the order passed by the NCLT Bench directing to deposit one third of Rs 1000 crore payable to secured creditors. The Appellate Tribunal directed it to unconditionally agree to deposit at least Rs 1000 crore with the NCLT, Chennai, Registrar.

Ingen Capital's resolution plan was approved by the NCLT on September 17, 2018, and as per the approved Resolution Plan, Ingen Capital was expected to deposit Rs 1000 crore upfront to the financial creditors, while the resolution plan was approved for consideration of Rs 1490 crore with a considerable haircut to the Banks.

Ingen Capital had to pay the amount in 30 days and settle the banks by that time. A consortium of 24 banks has lent a total of over Rs 3200 crore to the drug maker.

With Ingen Capital allegedly not paying the upfront money, NCLT has directed it to pay one third of the payment due to the financial creditors of the pharmaceutical company, which is around Rs 334 crore, in a fixed timeframe.

It was at this point Ingen Capital approached the NCLAT with its appeal. Earlier, Ingen Capital had alleged a difference between the assets they had been shown and the actual situation on ground. The allegation was denied by the RP.

For Ingen Capital, this was its second unsuccessful bid for Orchid. The private equity investor’s earlier bid, lower than the liquidation value of Orchid, was almost thrown out by the CoC. Ingen Capital later offered to pay Rs 100 crore more than the liquidation value and this was subsequently approved by the panel, and then by the NCLT.

Meanwhile, the NCLT nullified Ingen Capital's resolution plan and allowed 105 days to the RP and the CoC to carry out fresh expression of interest, the deadline which will come to an end in the middle of June, this year.