Abstract

Dilip Shangvi (Shangvi), founder of Indian pharmaceutical giant Sun Pharmaceutical Industries Ltd. (Sun Pharma), had invested his personal wealth in several companies. Some of his major investments were Rs 250 million in Natco Pharma Limited (Natco Pharma), and Rs 18 billion in Pune-based Suzlon Energy Ltd. (Suzlon). Shangvi held a 60.8 % stake in Sun Pharma and received more than Rs 12 billion as dividend from his shares between 2010 and 2015. The case discusses his investments using a risk return framework. The case (Part A) considers Shangvi as a marginal investor and attempts to understand the risk of his investments in Suzlon and Natco Pharma based on the historical data of monthly returns between 2010 and 2015. Part B of the case attempts to understand the systematic risk in Shangvi’s investments (Suzlon and Natco Pharma) and whether the investments were overvalued or undervalued.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Learn about the concept of the Marginal Investor
• Understand the Risks for a Marginal Investor
• Calculate the historical returns of the companies in which Shangvi invested
• Calculate Variance and Standard Deviation of the three companies and find out the riskier investment for Shangvi
• Understand the benefit of diversification in a portfolio

Keywords

Dilip Shangvi, Risk and Return, Portfolio, Minimum Variance Portfolio, Diversification, Unsystematic Risk, Suzlon, Natco Pharma, Sun Pharma