The stock has fallen 12% in three days, even though the company made a clarification related to corporate governance and whistleblower issues.
Brokerages are concerned about an increase in unsecured loans and advances to employees, domestic super-stockist distribution structure, as well as lack of clarity on a whistle-blower case.
The stock was trading at its lowest level since April 15, 2013. In the past three months, it underperformed the market by falling 36% from Rs 677 level, as compared to a 6% decline in the S&P BSE Sensex. Sun Pharma lost Rs 582 billion in market capitalisation during the period.
“Overall, management has rejected most allegations, barring two loans and advances worth Rs 22 billion given to employees and others, and domestic formulation sales routed through promoter distribution entity Aditya Medisales Limited. In both cases, management stated it will evaluate an alternative after consulting with investors,” analysts at IndiaNivesh Securities said in an event update.
Besides, the corporate governance issue could take some time to resolve if the case is reopened by SEBI, regarding which there is no clarity yet. This will act as an overhang on the stock until the outcome is declared, it added.
“The management responded to issues to some extent, while whistleblower related issues remained unaddressed as company has not yet received queries from SEBI. Though the key drivers for growth in US and domestic formulation market remain in place, we reduce PE multiple to 20x (from 27x) to factor ongoing issues related to corporate governance and reduce the price target to Rs 560 on 12-month forward,” Motilal Oswal Securities said in a note.
Shares of Sun Pharma Advanced Research (SPARC), a group company, has also hit a 52-week low of Rs 229, down 5% on the BSE in intra-day trade today, falling 12% in past three days. It touched a 52-week high of Rs 532 on January 12, 2018, in intra-day trade.