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Sun Pharmaceuticals founder Dilip Shanghvi and Tulsi Tanti of Suzlon Energy , are in advanced talks for a multi-layer deal to eventually give the pharma baron's family a stake in the debt-laden wind turbine maker.
People familiar with the development said a key player in the deal is Shanghvi's brother-in-law Sudhir Valia, who is a director in Sun Pharma as well as Lakshdeep Investments & Finance, which will provide Rs 4,000 crore which Suzlon will use to meet its working capital requirement.
In a separate transaction, these sources said the Tusli Tanti-owned company would take over solar panels firm PV Power Tech, which is controlled by Shanghvi's son Aalok, through a stock deal that would result in the Shangvi family acquiring stake in Suzlon. Aalok heads the international marketing division of Sun Pharma.
Both these transactions are dependent on Suzlon first repaying Rs 6,000 crore to State Bank of IndiaBSE 1.79 %. The turbine maker will make this payment from the recent Rs 7,200-crore sale of its German arm.
Sun Pharma declined comment. "We have no comments to offer on these queries," a spokesman said while Suzlon said it won't react to "market speculation". Suzlon's shares rose nearly 8% on the Bombay Stock Exchange on Thursday. ET had reported this week about talks between promoters of Sun Pharma and Suzlon, which had helped its stock rise.
If the deal materialises, it will help Shanghvi, India's richest man after Mukesh Ambani, expand into the wind energy sector. It will also help Suzlon cut its heavy burden of debt of Rs 17,300-crore. The deal will enable Suzlon to enter the solar energy sector, which is a key priority of the Narendra Modi government.
Suzlon does not manufacture any solar power equipment yet, but it said at the recent Vibrant Gujarat summit that it plans to set up 500 MW solar capacity in the state.
Sector experts said the deal being negotiated was good for both companies. "This is a good move to diversify and deleverage itself, and the intent is clear as Shanghvi has also applied for a payments bank licence; here also he is investing in his personal capacity," said a senior market expert who tracks Sun Pharma closely.
Suzlon, in the last few years has been grappling with a sharp slowdown in both local and global turbine sales due to the economic downturn, removal of tax concessions for wind power in India, high interest burden and stiff competition from Chinese companies and consequently its debt pile has been rising. Suzlon had defaulted on repayments in 2012. Its rising interest burden pushed the company into corporate debt restructuring.
Retiring debt and targeting high-growth markets like India, China and Brazil were the primary reason behind Suzlon taking a haircut while selling its German unit, Senvion SE, to US-based Centerbridge Partners for 1 billion euros earlier in January this year, an asset that it had purchased in 2007 for 1.4 billion. Dilip Shangvi's business on the other hand has flourished. It acquired Ranbaxy Laboratories and is interested in setting up a payments bank. Earlier, the company had spoken about entering the power sector.
"The Modi government's strong focus on wind and solar energy is another catalyst for this deal and a key reason why both the promoters, Shanghvi and Tanti, are keen to come together," said the source quoted above.
The government has substantially revised its earlier solar energy target of achieving 20,000 megawatts (mw) of capacity by 2022 to 100,000 mw. It also plans to put in place 60,000 mw of wind power capacity by then.
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