Ressurecting Sun Pharma: Shanghvi committed to pharma business; surrenders NBFC licence

New Delhi: The billionaire entrepreneur, Dilip Shanghvi, founder of the 1983 established drug giant Sun Pharmaceuticals (Sun Pharma) is striving to bounce back. Shanghvi is now determined to focus and remain committed to the pharma business as his personal investment company, Shanghvi Finance Private Limited (SFPl) has surrendered its nonbanking finance company (NBFC) licence, suggests a media report.

The company had submitted its application to surrender the NBFC licence in the month of March, according to a recent media report.

Medical Dialogue had earlier reported that after a four-year decline that erased 65 per cent from the value of Sun Pharma Industries, Shanghvi was preparing to make a comeback. He was doing it by borrowing a page from Big Pharma's playbook: investing in higher-margin patented medicines rather than relying solely on copying drugs.

Also Read: Dilip Shanghvi plans comeback; Sun Pharma to develop its own medicines: Report

In 2015, the firm had become the third largest producer in the world in terms of volumes and was poised to grow into an industry of $20 billion. The pharma giant was once the most profitable and the largest pharmaceutical company in India by market capitalisation on the Indian exchanges. However, over the past few years, the company has taken a hit resulting in fall of its financial graph.

Intermittently, the company was in soup over corporate governance concerns stemming from a whistleblower complaint, leading to a fall in its shares recently.

The company endeavoured to control the damages done by incorporating measures including a change in the distribution strategy. Unfortunately, the decision proved a backfire as the company recently reported a tumble in its fourth-quarter profit comparatively falling by half.

Also Read: Sun Pharma Q4 profit falls by half to Rs 636 crore due to change in distribution strategy

However, Shanghvi is still making attempts to take control of the turbulence in his business, for this, the enterprenuer has decided not to diversify away from his commitment to the pharma business. Thereby, SFPl, the financial business under by the Shanghvi Group has reportedly surrendered the NBFC licence.

Sanghvi holds 98.28% of SFPL, the major investments of which are in Sun Pharmaceutical and Sun Pharmaceutical Advanced Research--holding 40% in the first and 52% in the second.

The market value of these investments was Rs 47,326 crore at the end of March. SFPL's total assets had amounted to Rs 72,436.31 crore at the end of FY18, according to rating agency CARE.

SFPL has in the past stood guarantee for the fund-raising plans of related companies. In December, it gave an irreversible guarantee to Aditya Medisales' commercial paper worth Rs 500 crore and in March it backed fund-raising to the tune of Rs 500 crore by Suraksha Asset Reconstruction, a stressed asset buyout company owned by Sudhir Valia, a director in Sun Pharma and Shanghvi's brother-in-law.

It is learnt through a report in Economic Times that SFPL, besides surrendering its licence was willing to convert it into a core investment company (CIC). A CIC is a non-banking financial company carrying on the business of acquisition of shares and securities and which holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies and its investments in the equity shares in group companies constitutes not less than 60 per cent of its net assets as on the date of the last audited balance sheet.

However, the company's proposal has not been cleared by the RBI, which has asked it to meet certain criteria.