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Debt restructuring package -- Natco Pharma promoters asked to pump in funds

C.R. Sukumar

HYDERABAD, June 5

THE promoters of the Hyderabad-based Natco Pharma Ltd (NPL) were asked by their consortium of banks and financial institutions lead by the Industrial Development Bank of India (IDBI) to pump in funds to the tune of Rs. 15 crores before the consortium con siders sanctioning a debt restructuring package.

Following this, the Natco board met here on Monday and adopted a resolution to offer equity shares to the promoters on a preferential allotment basis for an amount not exceeding Rs. 15 crores. It was also decided to appoint a director and executive vice- president and to amend the objects clause to incorporate business of trading in pharma machinery and information technology.

The board has decided to convene an extra-ordinary general meeting of its shareholders on July 8 to seek their consent for the preferential offer. The resolution, if passed on July 8, would be valid till October 8, 2000.

A resolution to offer equity shares to the promoters on a preferential allotment basis was approved at the last annual general meeting held on September 29, 1999. However, the resolution could not be implemented within the stipulated period of three mont hs in terms of SEBI guidelines on preferential allotments, and hence, got lapsed.

According to sources, the promoters are currently not in a position to pump in the entire Rs. 15 crores at once as asked by IDBI. They propose to bring in Rs. 7 crores in the first installment and the balance in two to three installments.

The six months average market price of Natco scrip works out to around Rs. 26 for the promoters to subscribe to the shares in the proposed preferential offer. While the promoters currently hold a stake of 51.8 per cent on the Rs. 13.11-crore equity, thei r holding would increase to around 61 per cent on the post-preferential offer equity.

Sources told Business Line that the salient features of the debt restructuring package includes lowering of interest rates on all existing term loans, deferment of principal installments, moratorium of 18 months on repayment of principal amount, conversi on of irregular portion of the working capital into working capital term loan and sanctioning of fresh working capital limits.

When contacted, the Chairman and Managing Director, Dr. V.C. Nannapaneni, said: ``We are confident of pumping in the required funds and revive the operations of the company with the help of debt restructuring package to be sanctioned by IDBI.''

According to the audited figures as on March 31, last year, Natco Pharma's secured loans stood at Rs. 116.39 crores, whereas its unsecured loans amounted to Rs. 7.93 crores. Of this, term loans from financial institutions stood at Rs. 57.48 crores and fr om banks at Rs. 5.25 crores. Working capital borrowings from banks stood at Rs. 53.4 crores, while hire purchase of assets amounted to Rs. 25.14 lakhs.

For the year ended March 31, 2000, Natco Pharma incurred a net loss of Rs. 7.71 crores on a turnover of Rs. 76.38 crores as against a net loss of Rs. 22.08 crores on a turnover of Rs. 168.42 crores in the previous year. As on March 31, 1999, the company' s networth stood at Rs. 83.44 crores.