Wockhardt's debt hard pill to swallow for investors

01 April 2009

Habil Khorakiwala of Wockhardt resigned as MD. Further, the company's results are delayed due to potential restructuring. Where does this leave shareholders? Moneycontrol explores.

While Khorakiwala has resigned as MD, he will continue as an Executive Chairman of the company. His son, Murtaza H Khorakiwala has been appointed as an Additional Director & MD, subject to approval.

The company was scheduled to declare results yesterday. However, Wockhardt said that due to potential restructuring, audit of the company could not be completed. Annual audit for the year ended 2008 will be completed by April 25, 2009. Wockhardt said that it will refer the company to the Corporate Debt Restructuring (CDR)  cell for financial restructuring through ICICI Bank.

Financial analysis: Debt ridden
Wockhardt's debt equity ratio stands at 2.3x as on December 31. Wockhardt's net debt stands at Rs3,400 crore as on December 31, 2008.

Wockhardt has high net debt of roughly $600 million implying 180Per cent net gearing. The company has high exposure to forex rates. Significant portion of the company's debt has been denominated in foreign currency. Debt to market cap ratio is approximately 300Per cent. Wockhardt will convert Foreign Currency Convertible Bonds (FCCB) of  $110 million in October 2009 at conversion price of Rs629.8 per share.

Wockhardt's base business is growing at 20 Per cent plus rate. The company has maintained the operating profit margin of over 20 Per cent in CY08. The company has strong products portfolio and has made some big ticket acquisitions in the past.