Reeling under huge debt and facing lack of liquidity to run operations smoothly, Orchid Chemicals & Pharmaceuticals has decided to close down its Japan subsidiary, Orchid Pharma Japan KK. This follows the company?s exit from its joint venture company in China a few months ago. Orchid had entered the Japanese market in 2008 through a subsidiary, targeting the then $2.5-billion generics market.
The company, which earlier expected to complete the sale of its Aurangbad assets by June and then by September, to US-based Hospira, now hopes to close the deal early next year as its CDR package is expected to be finalised by banks by January, said Raghavendra Rao, CMD, Orchid.
Speaking to FE, he said: “Given the ongoing liquidity crisis, coupled with mounting losses, the company decided to cut establishment costs sharply and, therefore, exit Japan . We expect savings of around $1 million a year and will continue to serve the Japanese generics market out of India.”
To a question, Rao said: “We were doing annual sales of $20 million out of Japan and we don’t see any impact due to closing down of our subsidiary there.” Interestingly, when Orchid entered the Japanese market, it planned to achieve $100 million in sales.
To a question on delays in concluding the sale of the Aurangabad facility to Hospira for $202 million (the company entered into a pact with Hospira in mid-2012), Rao said: “The company moved banks? consortium to restructure its debt/loans, amounting over R3,000 crore (R2,000 crore in long-term and R1,000 crore in short-term), including its working capital needs. SBI Caps hopes to finalise the debt restructure package by January next year, post which the company will be in a position to finalise the deal with Hospira…”
