Dilip Shanghvi bets big on other businesses

Before the deal with Suzlon, Shanghvi made only a couple of small investments in his personal capacity. 
Dilip Shantilal Shanghvi, 59, has a problem that many would die for - dealing with excess cash. 

While his firm, Sun Pharmaceutical, has continued to give stellar performances and acquired 13 pharmaceutical companies, including Ranbaxy last year, it has Rs 6,366 crore (Rs 63.66 billion) of cash in banks.

So, the company, with a market capitalisation of Rs 1.89 lakh crore, has been generous in distributing dividends to protect its return ratios, in order to command high valuations. 

Shanghvi needs to deploy this excess cash that he and his family receive in the form of dividends as promoter of Sun Pharmaceutical.

In the past five years, the promoter family received Rs 1,220 crore (Rs 12.20 billion) as dividends. “We need to channelise our personal income in a proper manner,” says Sudhir Valia, executive director of Sun Pharmaceutical and Shanghvi’s brother-in-law. 

Before the deal with Suzlon, Shanghvi made only a couple of small investments in his personal capacity.

The first was in 2011, when he acquired a 11 per cent stake in Bio-Light Life Sciences Investments, an Israeli investment company specialising in the life sciences sector, for Rs 14 crore (Rs 140 million).

This was followed by an acquisition of a 3.5 per cent stake in rival firm Natco Pharma for Rs 25 crore (Rs 250 million) in late 2011. 

“We understand the pharma business so definitely that is one part we are comfortable to invest in. But these are small investments. Now, we need to make larger investments in companies that are well-positioned and run by people we trust,” says Valia. 

This is what prompted the Shanghvi family and its associates to pick up a 23 per cent stake in debt-ridden Suzlon Energy for Rs 1,800 crore (Rs 18 billion) on Saturday.

Shanghvi also has plans for another big investment - he is an applicant for a payments bank licence.

This might require his active attention, unless his son Aalok or daughter Vidhi are willing to take up the challenge. 

“Shanghvi cannot afford to dilute his focus on Sun Pharmaceutical, as it continues to grow at a rapid pace, with the complexity of global operations,” says an analyst with a foreign brokerage, on the condition of anonymity.

“That is why they are looking for passive investment opportunities, in which their money can be meaningfully deployed,” he adds.