Monday, April 07, 2008

Ranbaxy Making Hostile Takeover in Orchid

Although there is no confirmation from Malvinder Singh, MD of Ranbaxy, the huge rise in Orchid from Rs 106 to Rs 220 points to an definite attempt of a hostile takeover in Orchid., which news sources say is Ranbaxy.

Orchid Chemicals crashed 40% in one day, one reason being that promoter K Raghavendra Rao bought up 7% stake using margin money from brokers Indiabulls and Religare.

When Bear Stearns - which owned a substantial chunk of Orchid - pressed a distress sale, the brokers made a margin call which Rao could not honor, and hence they pressed sales to recover their money. The net result was Orchid crashed 40% and more. It has since bounced back, but now with FCCB holders not inclined to exercise their options at significant premium, Orchid is bound to remain with a lot of debt on its books.

Rao, who is also managing director, and other promoters now own 17% of the company and their rather foolhardy method of investment, belies all financial sense. Their objective was to stave off any hostile takeover - and it was easy for a outside investor, since 17% is hardly any reason to give 100% control to Rao and C0. over management. While Mr Rao has cleared his dues to these two firms, he still owes nearly Rs 65 crore to FIs and his current stake is pledged to them.

However, Rao is in a bigger soup. If the financial investors who own 37% of the company support Ranbaxy, then Rao may no longer be a dominant force in the company.

Read a related ET story here



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Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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