After Sun Pharma stock crash, co-promoter likely to quit Jaypee Infra race

Sudhir Valia's firm Suraksha Asset Reconstruction to focus on existing projects

Suraksha Asset Reconstruction, owned by Sudhir Valia, a co-promoter of Sun Pharmaceutical Industries, is likely to drop out of the race for Jaypee Infratech, according to sources. Suraksha was planning to make a bid for Jaypee in a tie-up with Dosti Realty, a Mumbai-based real estate developer.
 
The ongoing problems at Sun Pharmaceutical, which resulted in the share price of the pharma major falling 37 per cent since September last year (see chart), might have prompted a rethink.
 
A source familiar with the developments said, “Valia is unlikely to proceed as a bidder in the bankruptcy proceedings of Jaypee.”
 
Valia is the brother-in-law of Sun Pharma founder Dilip Shanghvi. Valia and his family together own nearly a 3.5 per cent stake in Sun Pharma, according to the December 2018 public filings. Their stake is valued at Rs 3,300 crore.
 

Last week, Sun Pharma shares fell to its lowest in almost six years after media reports of a new whistle-blower complaint alleging corporate governance lapses. Sun Pharma has denied any wrongdoing.
 
According to a source close to the development, the resolution plans for Jaypee Infratech by all the bidders are expected by January 27 and the joint venture between Suraksha and Dosti Realty is unlikely to bid as both firms are facing headwinds in the real estate sector, apart from falling share prices of Sun Pharma.
 
“The debt investors of Suraksha Realty have recently asked the company to top up shares which are backing the bonds. This was due to the fall in share price of Sun Pharma as well as of SPARC (Sun Pharma Advanced Research). Lenders are expecting aggressive bids for Jaypee Infratech,” said another source close to the developments.

Jaypee Infratech, which has large tracts of land on both sides of the Yamuna Expressway, had defaulted on its debt of Rs 9,913 crore, forcing lenders to refer the company to the National Company Law Tribunal under the Insolvency and Bankruptcy Code (IBC) , 2016.
 

Sudhir Valia, owner, Suraksha Asset Reconstruction

Emails sent to Suraksha and Dosti Realty did not elicit any response. Their holding in SPARC is 3.93 per cent, valued at Rs 175 crore based on Monday’s stock price.  Dosti Realty is also facing headwinds due to a sharp decline in real estate prices in Mumbai since demonetisation in November 2016. Of Dosti’s 14 ongoing projects, six are being carried out in partnership, with MJ Pharmaceuticals, a subsidiary of Sun Pharma and Suraksha Realty. 
 
For the financial year 2016-17 (last available), Dosti Realty had a revenue of Rs 376 crore and a profit of Rs 40.35 crore, compared to a revenue of Rs 421 crore and a profit of Rs  76.3 crore reported in the previous financial year.
 
In May last year, lenders of Jaypee Infratech had rejected an offer made by Suraksha-Dosti combine, saying the upfront cash was too low and the offer of Rs 7,000 crore was not attractive enough. Later, in August 2018, the Supreme Court ordered a re-bid of Jaypee Infratech after an amendment in the IBC, which brought homebuyers on par with financial creditors