We are students of MS-MS program one of our course is Strategic Financial Analysis and Design (SFAD), that case study is our class project to analyse it deeply. It is case study of Wockhart Pharmaceutical (will it rise from ashes) of India. This ppt is also you may/can use it as report, we did deep analysis, hopefully it is helpful for all students.

1. WOCKHARDTCASE ANALYSIS
Arsalan Qureshi 10666
Tariq Mehmood 56908
Saeed Ahmed 10603
Sikander Iqbal 10952
Faculty: Dr. Arsalan Hashmi

2. Flow of Presentation
Company Profile
Top Brands and Research &
Development
Rapid Expansion Strategy
Debt Burden & Crisis Phase
Corporate Debt Restructuring
& Future Prospects

3. Wockhardt: A Brief Insight
• Wockhardt Ltd.
• Habil Khorakiwala in the early 1960s.
• Pharmaceutical and biotechnology company.
• Biopharmaceuticals, nutritional products,
vaccines and APIs.
• Having 7,000 employees globally.
• Huge Revenue Generating from Europe.
• 1st Indian manufacturer of recombinant
human insulin.

4. Wockhardt: A Brief Insight..
• Intercontinental Medical Statistic…
RANKING
Sept 2010 - 15th Rank
Dec 2008 - 17th Rank
Feb 2000 - 77th Rank
Feb 1999 - 97th Rank

5. Top Brands..
Diabetalogy
Wosulin
(Recombinant
Insulin )
Mopaday (Oral
Ant diabetic)
Erythropoietin)
Glimaday (Oral
Ant diabetic)
Cough Therapy
Zedex
Bro-Zedex
Viscodyne
Neuro-
Psychiatry
Spasmo-
Proxyvon
Libotryp
Tryptomer

6. Research and Development
• Launched 08 new products.
• Product basket – 87
• 10 Certificate of Suitability of European
Pharmacopeia.
• Anti- infective molecules are in clinical
trials.

7. Acquisition…
• 2003- CP Pharma for $18mn. Through this
acquisition Wockhardt became one of the
top 10 generic companies in UK.
• Due to CP Pharma’s significant presence in
the hospital segment, Wockhardt became
the number two player in this segment.

8. Acquisition…..
WOCKHARDT
2004
Espharma Maxico
JV
Brazil
own
subsidery2007
Morton
Groove
2007
Negma
laboratories
2006
Pinewood

9. Raising Funds For Acquisitions
• Wockhardt has a working capital loan of
around Rs 300 crore though a consortium
(Group Of Companies).
• Rs 300 crore loan from ICICI Bank
• Rs 750 crore loan from SBI
• IPO of Wockhardt Hospitals was called off in
Feb 2008 due to under-subscription.
• Plans were chalked out to raise 800 crore rs
from this IPO.
• External commercial borrowings worth $250
million was taken by subsidiary Wockhardt
EU Operations (Swiss) AG.

10. Raising Funds For Acquisitions
• The foreign lenders include-
• Calyon Bank
• Barclays Bank
• HSBC
• Deutsche Bank
• Citi Bank
• Singapore-based DBS Bank
• Wockhardt also undertook LBO financing
for both Pinewood and Negma worth
approximately $200 million.

11. FCCB… Lethal Debt Issue
“Some debts are fun when you
are acquiring them….
…. but none are fun when you set
about retiring them.”
Ogden Nash (American poet 1902-71)

12. FCCB… Lethal Debt Issue
1 2 3 4 5 6
Debt to equity ratio 0.4 1.02 1.14 0.86 0.76 1.54
Long Term debt-equity ratio 0.33 0.96 1.13 0.86 0.67 0.96
0.4
1.02
1.14
0.86
0.76
1.54
0.33
0.96
1.13
0.86
0.67
0.96
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
DebttoEquity
Axis Title
Debt to equity ratio
Debt to equity ratio Long Term debt-equity ratio Linear (Debt to equity ratio)

13. Key Ratios of Wockhardt
2003 2004 2005 2006 2007 2008
Debt to equity ratio 0.4 1.02 1.14 0.86 0.76 1.54
Long Term debt-equity
ratio
0.33 0.96 1.13 0.86 0.67 0.96
current ratio 1.65 2.69 3.49 3.17 2.16 1.27
total assets turn over 1.3 0.81 0.65 0.7 0.71 0.66
interest coverage ratio 14.91 16.03 10.8 30.1 8.41 0.89
EBDIT margin % 22.5 30.69 31.74 31.05 27.87 10.74
EBIT margin % 20.41 28.63 29.31 28 25.07 7.54
PAT margin % 17.39 23.2 23.9 22.55 17.3 6.61
ROEC % 26.48 23.19 19.17 19.5 17.72 0
ROE % 31.66 37.99 33.45 29.23 21.58 0
payout % 20.98 27.2 23.71 26.58 63.81 0
price earning p/e 20.13 19.21 21.07 18.63 23.67 0
price to book value 5.52 6.21 6.04 4.01 4.45 1.75
enterprise value/EBDITA 16.04 14.56 15.87 13.5 15.09 0
market capitalization /
sales
3.41 4.31 4.87 3.36 3.69 0.82

14. FCCB… Issues & Covenants
• In Sept. 2004, the company issued 110,000,
5-year, zero coupon FCCBs of Face Value
US$1,000 each
• Total issue size of issue US$110 M
• These bonds were redeemable on the
maturing date at 129.578% of the face value
i.e., at US$1,295.78 in Oct 2009
• Total payable at maturity = US$142.54 M
(US$1,295.78 x 110,000 bonds)

15. FCCB… Issues & Covenants
• Bond holders could convert the bonds at
any time on or after Nov. 24, 2004, but prior
to the close of business on Sept. 25, 2009
• Each bond could be converted into 94.265
fully paid-up equity shares with a par value
of Rs 5 per share at a fixed price of Rs
486.075 per share
• 1 Bond FV $1,000 = INR 45,819.3738
• Or, $1 = INR 45.8194

16. FCCB… Issues & Covenants
• The company also had the option to redeem
these bonds in full, not in part, at any time
on or after Oct. 25, 2007
• But not less than seven business days prior
to the maturity date i.e. Oct. 25, 2009
• The FCCBs issue was oversubscribed by
five times
• These Bonds were listed at Hong Kong
Stocks Exchange (HKEX)  First Indian
Company to list debt or equity at HKEX

17. Impact of Global Meltdown …
2008
• The company posted PAT of INR 2.13 B
in 2007.
• INR depreciated by ~20% since April
2008
• Breached the psychological mark of
INR 50 in Nov 2009
• LIBOR for all major currencies
collapsed
• Huge losses due to mark-to-market:
INR 4,900 M due to forex contracts

18. Impact of Global Meltdown …
2008
• In Jan 2008, the company started to spin-
off some of its units, mainly R&D, to
create value for shareholders’
• Stock price:
 Jan 2003 INR 151
 Mar 2006 INR 506
 Early 2009 INR 109
• At this share price and global credit
crunch it was not feasible for
bondholders to convert it into shares,
and hence DEMAND FOR PAYMENT!

19. What did Wockhardt do?

20. What did Wockhardt do?
• With this ‘near death’ situation the company
opted for CDR – Corporate Debt
Restructuring
• The company restructured its loan and
made a dramatic turnaround.
• In India CDR is a 3-step system sponsored
by Reserve Bank of India
• CDR structure has 3-layers
 CDR Standing forum
 CDR Empowered Group
 CDR Cell

21. Debt Restructuring...
• CDR package provided that:
• The existing loans to continue at
concessional rate of 10% p.a.
• 8% p.a. to be paid monthly
• 2% p.a., to be converted into
preference share redeemable in 2018

22. Debt Restructuring...
• Priority loans were also made available
• To repay creditors, operational needs
and settle derivative losses
• This loan would be re-paid in 8 equal
quarterly installments w.e.f. Sept. 2010
• Management committed to sell / divest
non-core business
• Promoters agreed to bring in their
contribution in addition to sale proceeds

23. Debt Restructuring...
• CDR scheme instructed the company to pay
existing Rupee denominated loans in 24
quarterly installments w.e.f. July 2010
• Secured term loans were converted into
term working capital loans.

26. Winning Future for Wockhadrt…
• Chairman’s Speech at 11th Annual
General Meeting on Sep.20,2010:
• FCCBs issue has been resolved with
75% of holders.
• EU loan restructuring is near
completion.
• Wockhardt will tide over the debt crisis
and will be on the track of growth in
future.

27. "Some Debts Cannot
Be Paid Back With
Money”
From the movie: Payback
Based on the book
Payback: Debt and the Shadow
Side of Wealth by Margaret Atwood