Orchid Chemicals & Pharmaceuticals has come a long way since the sale of its injectables formulation business to Hospira for $400 million (about Rs 1,870 crore) in 2009-10. While the decision was unwelcome then, especially since it was parting with its growth engine, that it used the sale proceeds judiciously, has helped. It repaid about Rs 1,400 crore of loans, significantly de-leveraging its balance sheet. The result — debt-equity ratio, which had climbed from 1.3 to 4.4, is now at a more comfortable 1.5 level. In June 2010, it acquired the US-based generics marketing company, Karalex Pharma, to get the much-needed front-end presence there.

The 10-year agreement that it had struck with Hospira following the business sale had also helped. The agreement let Orchid supply active pharmaceutical ingredients (APIs), required for producing the injectables, to Hospira. This helped it keep the utilisation levels at its manufacturing capacities optimal, and in turn expanded its margins. In the just-ended quarter, Orchid reported a 26.6 per cent EBITDA margin. The management expects to sustain this performance, helped by limited competition for the products under contract (carbapenem, Tazo Pip and ADD-Vantage), in addition to the upcoming launch of Imipenem by Hospira.

Interestingly, over the last few months, FIIs holding in the company has increased to 12-13 per cent from about five per cent.

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