Orchid Chem to repay FCCB through ECB, borrows $100 mn

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Orchid Chem to repay FCCB through ECB, borrows $100 mn

K Raghavendra Rao, chairman and managing director, Orchid Chemicals spoke to CNBC-TV18 about the fund-raising the company has undertaken and strategies of the company going ahead.

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Orchid Chemicals is buzzing on the radar today on account of the USD 100 million debt that the company has raised through external commercial borrowing. K Raghavendra Rao, chairman and managing director, Orchid Chemicals spoke to CNBC-TV18 about the fund-raising and strategies of the company going ahead.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Just take us through the details of the USD 100 million ECB that you have raised?

A: Yes we have got a sanction for USD 100 million of External Commercial Borrowings (ECB) which will be used to repay the bonds for USD 117 million which are maturing in February 2012. Of course, there is also a yield-to-maturity (YTM) also to be added to this which will come from internal accruals. So we are replacing dollars with dollars and borrowing also is less than the repayment. So we don't have any issue in repayment of bonds in February when they mature.

Q: What kind of terms did you get on the ECB?

A: These terms are better than the interest that is there on these bonds which we are going to repay. The bonds that are currently outstanding are having 7.25% to YTM on a five-year bond, and the rates and tenure both are better than 7.25% and the tenure is longer than five years.

Q: What about the foreign exchange issue and the rupee-dollar rate? Does that worry you about how things might pan out?

A: Actually it is a positive for us because we are a net value addition company in terms of dollar terms. Our P&L is USD 400 million of exports each year and a net of imports for the material cost that goes into that- we are net dollar-positive of at least USD 200 million year-over-year, whereas the bonds are maturing once in five years. So in five years, we would be having a net value addition of more than a billion dollar. Thus foreign exchange is beneficial for us if the rupee is weakening. The only thing is in terms of stating the accounts at the end of each quarter, we need to restate the balance sheet items, instead of the P&L accruals over a period of time. So in a couple of quarters, we will be able to off set the notional loss on account of bonds at any point in time because our P&L is very strong in terms of dollars.

Q: And the gap between the total FCCB amount and the ECB is easily met through internal accruals?

A: Absolutely yes.