Strides Arcolab has redeemed all outstanding Foreign Currency Convertible Bonds (FCCB). The company had $ 80 million worth FCCB outstanding. The total payout for redeeming those bonds was $ 116 million, which is inclusive of the redemption premium of 45.058 per cent.
The net D/E ratio has gone down from 1.67 (in CY11) to 0.75 with this redemption. We expect the company’s D/E to further decline to 0.4 by CY13. Post this, Strides has nearly Rs 15 billion outstanding debt (earlier Rs 21billion) and cash of ~Rs 3 billion.
Analysing the FCCB redemption, Fortune Equity Brokers states that Strides would continue to benefit from the current shortage of steriles in the US (currently 82 per cent of the 168 drugs in shortage list are steriles) since injectable giants like Hospira continue to face manufacturing issues. Consolidated margins are expected to continue to improve as the contribution from higher margin steriles business (posted 26 per cent EBIDTA in Q1CY12) continues to increase. Steriles’ contribution to overall sales is likely to increase from 45 per cent in CY11 to almost 69 per cent in CY13. It is also expected its base business EBIDTA margin (excluding licensing income) to reach 21.6 per cent by CY13.
EP News Bureau – Mumbai