White Knight Dilip Shanghvi Ends Formal Pact With Suzlon

Dilip Shanghvi mutually ended his formal shareholders pact with Suzlon Energy Ltd. at a time the wind turbine maker has turned around its business after cutting debt.

Hiten Timbadia, Dilip Shanghvi Family and Associates’ nominee director on Suzlon’s board, also resigned with effect from Sept. 26, Suzlon said in an exchange filing. The termination of the agreement will not affect the operations of the company, it said.

Citing his admiration for Tulsi Tanti, the late founder of Suzlon, Shanghvi said in a statement that while his firms will continue as investors in the company, "we have taken a decision to terminate the formal Shareholder’s Agreement signed in 2015".

"We support the management’s plan to aggressively grow the business as well as their efforts towards regaining market share," he said. "The company has seen a turnaround under a challenging environment, which is a positive sign."

The founder of Sun Pharmaceutical Industries Ltd., who first invested in the then struggling Suzlon in 2015, signed an amended shareholders' agreement with the company in 2020 following a debt restructuring proposal.

Under the pact, the company issued up to 100 crore equity shares; up to 4.1 lakh 0.01% secured, optionally convertible debentures of Rs 1 lakh each; and up to 50 crore warrants of Rs 1 each. The board also approved the issuance of equity shares or equity-linked instruments to the tune of Rs 1,000 crore.

Among those who were allotted shares or instruments were Shanghvi Finance Pvt. Ltd., Aditya Medisales Ltd., and other members of Shanghvi family.

According to the company's update on Aug. 22 this year, each member of Dilip Shanghvi and Associates had agreed that the promoters "are and shall remain solely in absolute control" of the company at all times, unless otherwise agreed between the promoters and the investor group or set out in the agreement.

Suzlon's promoters held a 13.29% stake in the company as of Aug. 14, while the Shanghvi family and corporate bodies held a 12.72%. That compares with the 23% Sanghvi acquired for Rs 1,800 crore in 2015, when the Tanti family owned 24% and retained management control.

Shanghvi and Suzlon were to form an equal joint venture to develop 450-megawatt wind farms. Shanghvi was also to assist in providing incremental project-specific, non-fund-based working capital facilities to Suzlon for the execution of the project. 

On Tuesday, Crisil Ratings upgraded Suzlon's long-term and short-term debt facilities to 'CRISIL BBB+/A2' from ‘CRISIL BBB‐/A3‘ with a positive outlook.

According to Suzlon, this reflects their "strengthened financial position, operational excellence, and favourable sectoral tailwinds". The rating upgrade is a result of Suzlon's repayment of entire term debt through the proceeds of a qualified institutional placement of Rs 2,000 crore, the company said.

The reduction in fund-based borrowings, steady cash flows from the operations and maintenance services, and improved business profile in the wind turbine segment contributed to the upgrade, it said.