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C.R. Sukumar

HYDERABAD, April 1

FINANCIAL institutions led by the Industrial Development Bank of India (IDBI) have cleared a new debt restructuring package for Natco Pharma Ltd (NPL).

The move is expected to give a fresh lease of life to Natco, the Hyderabad-based ailing pharmaceutical firm, known for its `time release' technology in branded formulations.

Apart from postponing the principal payments of around Rs 28 crore by two years from October 2001 to October 2003 and waiving penal interest and liquidated damages, the FIs have agreed to reduce the rate of interest from an average of 15.5 per cent to 14 per cent on all term loans.

In the earlier package, the FIs had agreed to slash the interest from an average of 19.5 per cent to 15.5 per cent. In the new restructuring package, the company sought the interest rate to be brought down to 13 per cent.

In effect, the company gained a reduction of 5.5 per cent in interest rate from 19.5 per cent to 14 per cent.

Another significant feature of the new debt restructuring was the consent of FIs to convert the outstanding interest of Rs 5.35 crore as on September 30, 2001 into redeemable cumulative preference shares of the company.

As a part of the earlier debt restructuring package approved by the FIs, the promoters had brought in Rs 7.24 crore in the form of equity on a preferential offer basis during January last year.

The promoters are now required to pump in additional funds to the tune of Rs 7.76 crore in the form of equity before the end of current fiscal year.

Keeping these in view, the NPL board approved a proposal on Saturday to offer through preferential allotment route cumulative redeemable preference shares for an aggregate nominal value not exceeding Rs 5.5 crore to FIs and instruments with an aggregate nominal value, not exceeding Rs 6.6 crore to promoters.

The fresh equity offer would result in the company's paid-up equity going up to Rs 23.38 crore from the current level of Rs 17.38 crore.

On the current paid-up equity, the promoters hold a stake of 47.6 per cent, NRIs, FIIs and OCBs 1.4 per cent, Mutual funds and FIs 0.85 per cent, bodies corporate 23.6 per cent and the public hold 26.7 per cent.

NPL is scheduled convene an extraordinary general meeting of its shareholders on April 30 to seek their consent for the proposed preferential offer to promoters and FIs.

Meanwhile, with the lapse of non-competing agreement entered into with Sun Pharma in October 1998 while hiving off a basket of around 40 leading formulation brands, NPL chalked out an aggressive strategy for making a sizeable dent in branded formulations to regain its lost position in the domestic pharma industry.

The detailed strategy drawn by Natco covers bulk actives, formulations, generics for regulated markets, job work for leading pharma companies and research and development (R&D).

Apart from building a new formulations unit at a cost of Rs 45 crore to target the generics markets of US and Europe, Natco has of late launched over 50 branded formulations in the domestic market.

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