Shares of Orchid Pharma have been on a dream run as they have surged a mammoth 10,000 per cent since their relisting on the exchanges last November, after the company’s resolution under the Insolvency and Bankruptcy Code.
For the 97th consecutive session, shares of the company rose 5 per cent on the BSE on Tuesday. The stock closed at Rs 1,931.60, higher by Rs 91.95, or 5 per cent, from its previous close.
On the day of its relisting on November 3, 2020, it had closed at Rs 18 per share.
The company has a total of 4.08 crore outstanding shares, and Dhanuka Laboratories, which took over the company through the NCLT process in March last year, holds 98.04 per as per shareholding data on the BSE, as of December 2020.
Public shareholders hold just 1.93 per cent stake, of which banks and other financial institutions hold 1.19 per cent and individual shareholders have 0.51 per cent.
This seems to be a similar scenario which was witnessed in the case of Ruchi Soya whose shares surged a whopping 8,800 per cent during January-June last year.
It led the market experts to raise concerns on the incessant rise in prices at a time when the public shareholding is very low, following which capital market regulator SEBI in December 2020 tweaked the minimum public shareholding norms for listed companies facing bankruptcy under the Insolvency and Bankruptcy Code (IBC) and which get relisted on the stock market.
Now, such companies are mandated to have at least 5 per cent public shareholding at the time of their admission to dealing on stock exchange, as against no minimum requirement earlier.
Earlier, in case of Corporate Insolvency Resolution Process (CIRP) where the public shareholding falls below 10 per cent, such listed companies are required to bring the public shareholding to at least 10 per cent within a period of 18 months and to 25 per cent within 36 months.
Further, such companies are provided 12 months to achieve public shareholding of 10 per cent from the date such shares of the company are admitted to dealings on stock exchange and 36 months to achieve public shareholding of 25 per cent.
The lock-in on equity shares allotted to the resolution applicant under the resolution plan shall not be applicable to the extent to achieve 10 per cent public shareholding within 12 months.
Chennai-based Orchid Pharma was established in 1992 and is involved in the development, manufacture and marketing of diverse bulk actives, formulations and nutraceuticals.
One of the operational creditors moved an application with NCLT, Chennai for admission of the company into CIRP in August 2017. NCLT, Chennai admitted the Company in CIRP and the powers of the Board were suspended from August 17, 2017.
Share price of some other listed companies which achieved resolution after being taken over under the IBC have also increased.
Shares of Alok Industries, which was acquired by Reliance Industries and JM Financial Asset Reconstruction Company, surged around 300 per cent in the past year.
Stock price of Jaypee Infratech rose nearly 200 per cent during the period.
Shares of Amtek Auto and IVRCL Ltd which have also been resolved under the IBC, have been suspended on the exchanges.