Orchid Pharma shares gain 3% on board’s nod to raise ₹500 cr via QIP

Shares of Orchid Pharma climbed over 3% in early trade on Friday, in an otherwise weak broader market, after the pharmaceutical company received its board's approval to raise ₹500 crore via the Qualified Institutional Placement (QIP) programme. The fundraise proposal is subject to the approval of the shareholders, it said in a stock exchange filing late night on Thursday. Edelweiss Financial Services Limited and JM Financial Limited are the investment banks handling the share sale.

Reversing the previous session losses, Orchid Pharma share price opened 1% higher at ₹398, against the last closing price of ₹394.20 on the BSE. In the first two hours of the day’s trade so far, the pharma stock rose as much as 3.3% to ₹407.25, while market capitalisation climbed to ₹1,639.6 crore. On the volume front, 1,297 shares changed hands over the counter as compared to the two-week average volume of 1,053 stocks.

Orchid Pharma shares currently trade 12% lower than their 52-week high of ₹463.05 touched on December 21, 2021, while it has surged 56% against its 52-week low of ₹260.20 on February 25, 2022. The smallcap stock has given a muted return of 2% in the past one year, while it gained 35% in six months. In the last one month, the share price of the Chennai-based pharma firm has risen nearly 3%.

In an exchange filing on Thursday, the company said it has been on a growth spree following a successful turnaround of the Insolvency Bankruptcy Code case. In August 2017, the Chennai bench of the National Company Law Tribunal (NCLT) ordered insolvency proceedings against Orchid in a case filed by the private sector lender, Lakshmi Vilas Bank. As per the terms set, the cash-strapped company then owed ₹3,200 crore to a consortium of 24 banks. 

“On back of a robust product launch pipeline and an agile management team, the company is poised to become an even stronger player in the cephalosporin antibiotics space,” it said.

As per the exchange filing, the Dhanuka group, which took over debt-ridden Orchid in 2018, will dilute a 15% stake in the company following the QIP placement, by March 2023.

In March 2020, Gurgaon-based Dhanuka Laboratories acquired mid-sized Orchid Pharma with a bid of ₹1,116 crore under the insolvency resolution plan. Since then, the company has gone through a transformation going from a negative EBIDTA to healthy positive numbers. In the second quarter ended September 30, 2022, Orchid posted a 36% increase in overall revenue from operations, while EBIDTA jumped 104% during the quarter, driven by rising sales and a laser-like control of expenses.

Established in 1992 as an export-oriented unit (EOU), Orchid is a vertically integrated company spanning the entire pharmaceutical value chain with interests in research, manufacturing, and marketing. Orchid claims it is the only Indian pharmaceutical company, to ever have invented a New Chemical Entity (NCE, also colloquially called New Drug) which has cleared Global Clinical Trials of Phase III. The molecule is out licensed (on Royalty model) and now under a worldwide new drug approval process.