Mumbai (Maharashtra) [India], Feb 25 : Pharmaceutical and biotechnology major Wockhardt said on Tuesday that India Ratings and Research (Ind-Ra) has placed its long-term issuer rating of BB plus on rating watch evolving (RWE) with a negative outlook.
The RWE follows Wockhardt's divestment of a portion of its domestic branded business to Dr Reddy's Laboratories Ltd for Rs 1,850 crore.
The divested business comprises 62 products in multiple therapeutic areas such as respiratory, neurology, vitamins, minerals and supplements, dermatology, gastroenterology, pain and vaccines along with the related sales and marketing teams, assets and liabilities, including a manufacturing facility at Baddi in Himachal Pradesh.
The business being transferred had reported revenue of around Rs 377 crore (about 15 per cent of the consolidated revenue) in the first nine months of current fiscal (9M FY20).
The transaction is likely to be completed by end-1Q FY21 subject to the receipt of approvals from shareholders, lenders and others under the applicable statutes.
As per the management, said Ind-Ra, the deal is in line with Wockhardt's strategic plan to shift from acute therapeutic areas to more chronic businesses such as anti-diabetes, central nervous system etc. and also focus on its antibiotic portfolio of new chemical entities (NCEs).
The company has also indicated that the divestment will ensure the availability of adequate liquidity to stimulate growth in the chronic domestic branded business, international operations, investments in biosimilars for the US market and in the company's global clinical trials of anti-infectives (new chemical entities approved under the coveted qualified infectious disease product programme of the United States Food and Drug Administration (US FDA) and research and development activities.
Wockhardt has a total debt repayment of Rs 840 crore in FY21 with around Rs 412 crore falling due over 1Q to 2Q FY21. As per the management, out of the total deal proceeds of Rs 1,850 crore (before taxes and expenses), Rs 412 crore is likely to be utilised for the repayment of term debt over 1Q to 2QFY21.
The remaining proceeds are likely to be utilised towards working capital requirement to scale up the India business, the redemption of promoters' preference shares, and the balance amount to be used for conducting clinical trials molecules of phase two and three stages.
Ind-Ra believes the proceeds will help the company to manage its debt repayment obligation over 1Q FY21 to 2Q FY21. However, the agency will continue to monitor timely debt repayments that will be due in the remaining part of FY21.
( With inputs from ANI )