 "Newsmaker: Dilip Shanghvi")
Dilip Shanghvi has made a fortune in the pharma business, but the 61-year-old soft-spoken billionaire has had ambitions beyond medicine for long.
Known for his astute business skills and sharp strategy, Shanghvi, the promoter of Sun Pharma, has been investing his personal wealth in other businesses over the past two decades. These include petrochemicals and power.
Shanghvi founded Sun Petrochemicals in the mid-1990s and the company has been manufacturing acetylene carbon black, a petrochemical product, since 1999. It has a plant in the Raigad district of Maharashtra.
Sun Petrochemicals, which is privately held by Shanghvi, is in the news for bidding for seven oil blocks: five in Gujarat and two off the Mumbai coast. These are amongst the 67 small and marginal oil blocks that have been put up for auction by the government.
It is only in the last two years that the company has sharpened focus on the oil and gas sector. Sun Petrochemical’s articles of association were amended in September 2014 to explore opportunities in the oil business. A separate division, Sun Oil and Natural Gas, was created in January 2015 to look for oil and gas fields in politically stable countries.
According to Sun Petrochemical’s FY 2015 annual report, 145 oil and gas block opportunities around the world were scrutinised during the year. Last March, it signed a deal for the transfer of Interlink Petroleum’s interest in Modhera and Baola oil and gas fields in Gujarat. Both the blocks were awarded under the New Exploration Licencing Policy. Similarly, the company also signed memorandums of understanding with US-based Triumph Oil and Gas Operating Company and Singapore’s Loyz Oil for technical collaboration and acquisition of oil and gas blocks jointly.
“While the upheavals in the pharma sector may have kept Shanghvi preoccupied, he is serious about the oil and gas business,” says a close associate on the condition of anonymity. “He has a big team at Sun Petrochemicals and takes a personal interest in the business.”
Sun Pharma is India’s largest pharma company by sales and Shanghvi’s net worth is pegged at $ 13.9 billion, according to Bloomberg’s latest estimates. The Sun Pharma stock has declined over 16 per cent since January, eroding its market capitalisation. But the company has been generous in paying equity dividend and in the past seven years, the promoter family received Rs 1,800 crore in dividends.
But oil and gas isn’t Shanghvi’s only interest outside pharma. Last February, he picked up 23 per cent stake in stressed wind turbine maker Suzlon Energy for Rs 1,800 crore. The acquisition is financial in nature and Suzlon promoter Tulsi Tanti retains control of the company.
Shanghvi had also proposed to collaborate with Suzlon for developing a 450-Mw wind farm in a 50:50 joint venture and to help it raise non-fund working capital for projects as a part of the deal.
Shanghvi declined to comment on his plans outside the pharma business.
“We need to channelise our personal income in a proper manner,” Sudhir Valia, executive director, Sun Pharmaceutical, and Shanghvi’s brother-in-law, had told Business Standard following the Suzlon deal last year.
Not all of Shanghvi’s investments have been successful though. In 2011, he wanted to invest Rs 5,000 crore to set up a 1,000-Mw power generation plant. He thought the investment made sense because power being a “more capital-intensive, but less time-intensive business would not require much of management resources once set up.” The power project, however, failed to take off in the absence of coal linkages.
In May, Shanghvi withdrew his application to set up a payments bank. Dilip Shanghvi Family & Associates had teamed up with IDFC Bank and Telenor Financial Services for the venture and had secured an in-principle licence from the Reserve Bank of India in September last year. Shanghvi did not disclose why he dropped the plan.
While some of his personal business ventures may have failed to materialise, Shanghvi’s core pharma business seems on track for higher growth. Though there have been setbacks and some of Sun Pharma’s plants continue to remain under the scanner of the US Food and Drugs Administration, the company is building up a pipeline of specialty and complex products for growth and is expanding in new markets such as Russia and Japan. The integration of Ranbaxy, which was acquired in a $ 3.2-billion transaction, too, is progressing smoothly, the company management says.
Even though Shanghvi’s investments have gone far beyond what he initially started with, his core business has only become stronger.
