Dilip Shanghvi staring at huge loss as Suzlon Energy heads to bankruptcy

Dilip Shanghvi, the Sun Pharma promoter has 23% in renewable power firm that has failed to get debt recast plan

Dilip Shanghvi, the billionaire-promoter of Sun Pharmaceutical Industries, is staring at a huge loss with renewable power firm Suzlon Energy heading for bankruptcy courts by next week.
 
Shanghvi, who had invested Rs 1,400 crore in picking up 23 per cent stake in Suzlon in 2014 in his personal capacity, will be one of the top losers along with the Suzlon promoter, the Tanti family.
 
Bankers said Suzlon failed to come up with a debt recast plan by December-end deadline. According to the Reserve Bank of India guidelines, the lenders had sought approval from a credit rating agency for the debt recast plan by Suzlon that the company failed to get, bankers said.
 
The lenders to the renewable power firm had signed an inter-credit agreement in June.  Subsequently, the company envisaged a debt recast plan, which divided its debt into sustainable and non-sustainable categories. However, rating firm CRISIL indicated to lenders the company would not be able to service the sustainable debt part as its earnings would not be able to keep pace with its finance cost.
 
As of Friday, Suzlon Energy stock, which lost 64 per cent of its value in calendar 2019, was worth Rs 1,053 crore, giving a valuation of Rs 242 crore to Shanghvi's stake. Since January this year, Shanghvi, who is ranked number 10 in Bloomberg rich list, has lost close to a billion dollar of wealth - taking his total net worth to $7.3 billion. The fall in wealth was in spite of Sun Pharma stock closing the year with a marginal loss of just one per cent.
 

A banking source said Suzlon would be sent for debt resolution, according to the Insolvency and Bankruptcy code guidelines, by the first week of January along with several other companies in the power sector. The company owes close to Rs 11,300 crore of debt to Indian banks and the banks will have to make provisions for the loan in the March quarter, according to the RBI guidelines.
 
An email to Suzlon did not elicit any response. A spokesperson of Shanghvi declined to comment on the issue.
 
In FY13, Suzlon was referred to the corporate debt restructuring by banks on hopes that the positive long-term outlook of the wind energy sector would help the company come back to profitability. The CDR package was implemented after all banks signed an agreement on March 28, 2013 to restructure the loans. By 2014, Shanghvi was bought in as an investor into the company who promised to invest an additional Rs 450 crore to set up a wind mill park. In 2015, Suzlon sold its German subsidiary Senvion SA for 1 billion pound to Centerbridge Partners and the proceeds were used to repay debt.
 
According to the IBC norms, the company's board of directors would be suspended and the court would appoint a resolution professional to sell the company to the highest bidder. As the company is handed over to a new owner, the existing shareholders of the company end up in a loss.