India’s largest pharmaceutical company, Dilip Shanghvi-led Sun Pharma saw its valuations tumble when a note titled “Murky Waters of Sun Pharma” by a foreign brokerage did the rounds on social media in November-end. The note talked of inadequate disclosures by the firm related to the role of Shanghvi’s brother-in-law and an executive director of Sun Pharma, Sudhir Valia, about Sun Pharma’s past links with dubious traders Ketan Parekh and Dharmesh Doshi, about related-party transactions involving Shanghvi and his family and guarantees given to a certain real estate firm, Suraksha Realty.
Then, news of a whistle-blower lodging a complaint with market regulator Sebi surfaced. Sebi sources confirmed that following the complaint, it was planning to reopen investigations in an earlier insider trading case (when Sun bought Ranbaxy from Daiichi) and on matters related to taxation and foreign currency convertible bonds (FCCBs).
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The insider trading case was settled by Shanghvi and others in August 2017 on payment of Rs 1.8 million. The whistle-blower has allegedly questioned the selection of a little-known London-based firm Jermyn Capital to manage Sun’s FCCB issue in 2004. Following the stock tanking to a six-month low, Sun Pharma’s leadership held an investor call. Shanghvi, however, failed to provide satisfactory answers to questions raised by analysts on an unsecured loan advance (Rs 22.4 billion) to employees and others. However, Shanghvi said that the firm was ready to take necessary steps if investors were unhappy.
But the stock fell to a five-year low soon, because Shanghvi did not disclose details of these loans citing business sensitivity.