<div>It’s a business dictum that when uncertainty is high, you don’t dig big holes. Companies in two industries that may be in big holes just now are telecom and power. So one has to wonder: does it make strategic sense for the promoters of Sun Pharmaceuticals, the largest drug company by market capitalisation to diversify into those sectors?<br /><br />On October 26, Sudhir V Valia, the brother-in-law of Dilip Shanghvi, managing director and founder of Sun Pharma, hit the headlines by entering into a joint venture with Norwegian telecom firm Telenor; Valia’s Lakshdeep Investments & Finance will be Telenor’s partner in their new venture Telewings Communications, which will participate in the forthcoming 2G spectrum auction.<br /><br />Lakshdeep Investments & Finance holds just over one per cent of Sun Pharma. Media reports cited InGovern Research Services, a consultancy firm that advises investors on corporate governance and proxy voting, as saying that Lakshdeep’s 26 per cent equity in the Telenor joint venture is in the range of Rs 2,000 to Rs 2,500 crore. The firm’s current funding sources amount to Rs 1000- Rs 1200 crore; the balance will have to be loans, Ingovern adds.<br /><br />Earlier this month, Sun Pharma’s board approved a resolution that would allow the company to raise Rs 8,000 crore in loans; the firm also has about Rs 6,000 crore in cash and cash equivalents on its books. So there has been speculation among industry observers that this could be used to part-finance the telecom business.<br /><br />But Sun Pharma denies the move. "We don't have any plans to fund Lakshdweep Investments,” says a company spokesman. “The resolution passed by the board was an enabling resolution; we will be seeking shareholder approval to raise the money.”<br /><br />"This is baseless speculation, and at this point of time even I do not know how much assets we (Telewings) are going to get in the auction (2G spectrum),” says Valia. “We have to wait till the auction to decide how much I will have to invest." He says that he has various funding options available in his personal capacity to complete the deal.<br /><br />In fact, both the telecom and power generation ventures – more on that later – are personal investments of Shanghvi (he is worth $9 billion, according to Forbes magazine) and Valia, not part of the company. <br /><br />Is it possible that these moves were in the offing for quite some time? A few months ago, in May this year, Dilip Shanghvi stepped down as chairman of the company in May paving way for Israel Markov, the former CEO of Teva Pharma to become chairman. Valia also stepped down as chief financial officer (CFO) to make way for Uday Baldota, another long-serving Sun Pharma executive.<br /><br />Readers may recall that a year ago, Shanghvi made the surprising announcement that he was setting up a power generating business with a 2,600 MW plant in Andhra Pradesh. He also then picked Valia to spearhead that venture, Alpha Infra Projects.<br /><br />But since that time, the scenario has changed somewhat. "We have the various clearances in place and are waiting for coal linkages and other problems related to the thermal power segment of the sector to settle down to launch this project," says Valia.<br /><br />Will there be other such investments? Valia doesn’t duck the question. “We are looking at good opportunities (to invest) and that may take time,” he says. But for Shanghvi, Sun Pharma will continue to be the center of his solar system.</div>
