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Last Updated : Feb 12, 2020 03:49 PM IST | Source: Moneycontrol.com

Wockhardt to not use cash from slump sale for debt reduction; share price tanks 8%

The company is not planning for debt reduction in particular as part of this transaction, Khorakiwala said.

 
 
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Shares of Wockhardt extended losses to 8 percent intraday on February 12 after the company said it will not use the cash raised from slump sale for debt reduction.

Profit booking could be another reason for the fall in share price as the stock had rallied 50 percent in last one month amid stake sale buzz. It closed at Rs 365.20, down Rs 28.25, or 7.18 percent on BSE.

Wockhardt today decided to sell select branded generic business in India and other countries to Dr Reddy's Laboratories, via slump sale, for Rs 1,850 crore or $260 million.

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The deal comprised of 62 products and related business, assets and liabilities including manufacturing facility at Baddi, Himachal Pradesh, India, the company said in its BSE filing.

The business being transferred reported revenue from operation around Rs 377 crore which is around 15 percent of the consolidated revenue for 9 months ended December 2019.

The proposed divestment is around 3.8 times the annualised revenue of the business being transferred, said the company.

This transaction is expected to be completed in May 2020 subject to shareholders and lenders' approval, it added.

After the deal, Habil Khorakiwala, the Founder Chairman & Group CEO, told CNBC-TV18 that the funds raised will be used to improve liquidity condition, grow the business, and for research and development. "Company is aiming at double-digit growth for the business next year."

"The debt payment is due over a period of time, but the company is not planning for debt reduction in particular as part of this transaction and the debt reduction is not the reason for the sale of the Baddi unit," he said.

The company has a debt of Rs 2,200 crore.

Khorakiwala feels the company's revenue for FY21 will be higher than FY20 despite the divestment.

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First Published on Feb 12, 2020 03:49 pm
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