Wicked ! Wicked ! Wockhardt on a Wednesday Morning !

Wockhardt continues to be Wicked…. dropped over Ten percent this Wednesday Morning to Rs 71 levels….Shareholders who believed in the Khorakiwalas have been clearly betrayed

Khorakiwalas had been on an ambitious acquisition foray,creating a global footprint by buying out companies in USA and Europe…It bought out

  • Pinewood Laboratories of Ireland for US $ 150 Million in October 2006
  • Negma Laboratories of France for US $ 265 Mllion in March 2007
  • Morton Grove Pharmaceuticals for US $ 38 Million in November 2007

It leveraged it’s Balance Sheet sizeably to fund these plans.The Debt is Rs 3400 crs as on December 31,2008 with a Debt/Equity ratio of a very high 2.3 in current credit contraction circumstances.The Networth is Rs 1480 crs  and the Market Capitalisation has sunk to Rs 850 crs this morning

Wockhardt is also one of those unfortunate companies who took the FCCB route to raise capital.US $ 169 Million of this is yet outstanding and US $ 110 Million is payable in September this year…no possibility of conversion as the Conversion price is Rs 629

Last year it’s Wockhardt Hospitals Public Issue was withdrawn citing poor market conditions.This forced the Khorakiwalas to pledge 43.1% of their 73% holding in Wockhardt to raise Rs 350 crs for the Hospital…It is now trying to get in a strategic Investor…but poor valuations are a hindrance.

The Company has announced it will be beginning a CDR Exercise through ICICI Bank

A few years ago ,Wockhardt was involved in a major Billion Dollar acquisition plan in USA…It failed but the Khorakiwalas disclosed over Rs 50 crores spend in the effort…They refused to divulge the details…at the time I had said if this was the level of Corporate Governance on Disclosures then it would be better that Shareholders exit…The Share Price was then in excess of Rs 400

This morning,Ashok Wadhwa of Ambit Holdings came on CNBC TV 18 and was asked his view on Wockhardt…he says that Wockhardt has good management,good distribution and good research and this excessive leverage issue could have happened to anybody in any industry…and that they will come out of this….Well,he should have disclosed whether he has or has had  or was endeavouring to have any business relationship with the Wockhardt Group…..I tend to disagree with Wadhwa…The Promoters have clearly not been Investor and Shareholder friendly….and I daresay even Employee friendly ! There has been lack of Transperancy and Accountability …..Carol Infotech,now Wockhardt Life Sciences,being a case in Point….When they’re up against the wall now they have little option but to come clean on a host of issues and admit that they are collapsing under the weight of High Debt !

It’s little consolation to shareholders that the CMD,father,Habil Khorakiwala, has stepped down as MD in favour of his son,Murtaza.

You should have walked away from Wockhardt a long time ago….Now at Rs 71 it is difficult to do so…because any favourable developement on restructuring and obtaining Finances will cause the price to move back up…However the Question Marks on Corporate Governance and Promoter’s Business Acumen remains suspect

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