The Hindu Business Line : Ball in Orchid’s court

Mumbai/ Chennai, April 10 With the “hostile” hatchet now buried by Ranbaxy, the ball, it seems, is in the court of Chennai-based Orchid Chemicals and Pharmaceuticals Ltd.

There is no denying that Ranbaxy is interested in Orchid, but the approach will not be hostile, said a source close to the company. The Orchid management needs to decide on getting into an alliance of sorts with Ranbaxy, the source told Business Line.

That has been Ranbaxy’s modus operandi in the recent past, illustrated by the stakes it acquired in Zenotech Laboratories Ltd, Krebs Biochemicals & Industries Ltd and Jupiter Bioscience Ltd, respectively.

Ranbaxy’s Chief Executive Officer and Managing Director, Mr Malvinder Singh, is also understood to have been in Chennai a couple of days ago. But “no comment” was Mr Singh’s response to a query from the correspondent.

Orchid’s spokesperson, however, denied that there was any proposal on the table from Ranbaxy or the Apollo Hospitals group. Healthcare funds, hedge funds and existing investors are interested in investing in Orchid, he said, and it was because they see value in the fundamentals of the company, he added.

Another source indicated that Life Insurance Corporation (LIC), the single largest institutional investor in Orchid, will leave it to the two companies to sort it out among themselves, as long as LIC’s interests are protected. LIC holds 7.8 per cent equity in Orchid.

Mr G. Srinivasan, Chairman and Managing Director, United India Insurance, which holds 2.48 per cent in Orchid Chemicals, said that his company was yet to take a stand on the issue.

Asked if he would support the incumbent management or sell off the shares in the case of an attractive open offer, he said, “I have no comment to make because we have not looked into the matter.” The spotlight now falls on Orchid’s Founder, Mr K. Raghavendra Rao – how and when he would raise the estimated Rs 90 crore to exercise and convert his 50 lakh warrants into equity. The conversion deadline is August 31 and it will translate into an additional equity of 7.6 per cent. At present, promoters hold 17 per cent equity. Mr Rao, whose itinerary on Thursday is said to have included a visit to Tirupati, was not available for comment.

Orchid shares closed at Rs 228.70 on the BSE, down close to 2 per cent. Ranbaxy’s shares closed down over four per cent on the BSE at Rs 450.65.