DRT restrains Morepen on GDR proceeds

The Debt Recovery Tribunal (DRT-II, Mumbai) has passed an order of injunction to restrain Morepen Laboratories Ltd — which is reeling u...

The Debt Recovery Tribunal (DRT-II, Mumbai) has passed an order of injunction to restrain Morepen Laboratories Ltd — which is reeling under huge liabilities of around Rs 600 crore — from utilising a part of its global depository receipt (GDR) proceeds of Rs 72 crore. The injunction is to the extent of Rs 12 crore.

The DRT order, which was passed on June 24, 2003 by presiding officer KJ Paratwar, is based on a case filed by SBI Commercial & International Bank (SBICIB), which has an exposure of about Rs 12 crore (principal amount of Rs 10 crore) in the

href="https://indian-express-develop.go-vip.net/section/cities/delhi/" class="" rel="nofollow, noopener" target="_blank">Delhi-based pharmaceutical company. SBICIB is a wholly-owned subsidiary of the State Bank of India (SBI). Bank of Nova Scotia has also filed a case against Morepen Labs in Delhi DRT. The bank has given a working capital loan of Rs 79 crore to the pharma company.

Dose needed

• Debt liabilities of around Rs 600 crore
• Fixed deposits of nearly Rs 100 crore
• Banks and FIs after the company for dues
• Share price falls from Rs 599 to Rs 10.49

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Other lenders of Morepen Labs — including Bank of India, Karur Vysya Bank and Laxmi Vilas Bank, among others — are contemplating a restructuring of their loan exposure. Industry sources have also informed that Morepen Labs was planning to go to the corporate debt restructuring cell.

“The company (Morepen Labs) defaulted in repaying the loan which fell due on December 23, 2002,” an official with SBICIB told The Indian Express. SBICIB has also written a letter to the Reserve Bank of India citing the pharma company as a wilful defaulter. Earlier, Morepen Labs had, in a letter to SBICIB, said that they would pay off its dues utilising its GDR proceeds.

Morepen Labs had in March 2003 issued GDRs to raise funds in order to come out of its financial crisis. The company was hoping to raise around Rs 300 crore, but could only manage to mobilise Rs 72 crore due to the downswing of the share market around that time.

The company ran into problems as it miscalculated on the marketing strategy of its anti-histamine drug Loratadine. The company could not generate enough revenues it projected from sales of this drug despite a 180-day exclusivity period. Apart from defaults to banks and financial institutions, the company is also struggling to repay fixed deposits mobilised from investors. Though the company had collected around Rs 150 crore as FD from investors, it paid back only around Rs 40 crore. The company has approached the Company Law Board for reschedulement of repayment.

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As a result of the problems in the company, its share price collapsed from Rs 599 in 2000 to just Rs 10.49 on the Bombay Stock Exchange. “I had invested in the shares and FD of the company thinking it will get into the big league. Now I’m counting my losses,” said an investor.