The Hindu Business Line : Solrex unlikely to push Orchid stake past 15%

Mumbai, April 16 The high-decibel acquisition of over 14 per cent equity in Chennai’s Orchid Chemicals and Pharmaceuticals by Ranbaxy-promoter company Solrex, it seems, is unlikely to scale the next level.

Solrex is unlikely to push the 15 per cent mark, a source close to the company told Business Line, adding that promoters of the two groups are working out an alliance instead. If Solrex crossed the 15 per cent equity level, it would have triggered an open offer for Orchid’s shares.

The development comes on a day when Orchid shares continued to witness a sharp rise, up close to 11 per cent on the Bombay Stock Exchange at Rs 319.05 on Wednesday. The company’s share-price also touched its 52-week high of Rs 330 during the day.

Orchid’s spokesperson, however, denied that the company’s promoters were in talks with Ranbaxy. The company is in talks with other investors and institutions, he maintained, adding that there was nothing concrete on the table yet.

Orchid promoters hold 17 per cent stake in the company.

Meanwhile, pharma analysts tracking the development point out that there are other reasons why Ranbaxy would not push the 15 per cent mark. Orchid has an FCCB of $175 million and any change in management or control could mean that Ranbaxy would have to pick up this tab. Also, Ranbaxy would not want to trigger an open offer to buy Orchid’s shares, when in fact the latter’s shares were trading at a high of over Rs 300, he said.

Past alliances

In other local alliances that Ranbaxy had struck over the last year, like those with Krebs Biochemicals and Jupiter BioSciences, Ranbaxy has chosen not to breach the 14.9 per cent level. But those deals were done in a more cordial environment, the analyst pointed out, which is another reason why Ranbaxy is unlikely to push the envelope in Orchid’s case and have a hostile promoter to deal with, he added. Ranbaxy’s interest in Orchid hit the headlines when Solrex aggressively picked up equity in it.

Ranbaxy shares were marginally down at Rs 479.85 on the BSE.