Sun Pharma says there is great asymmetry in the information circulating between analysts, investors and media, leading to intense speculation. Photo: Mint
Sun Pharma says there is great asymmetry in the information circulating between analysts, investors and media, leading to intense speculation. Photo: Mint

Sun Pharma shares plunge over 12% on whistleblower complaint

  • Sun Pharma distributor Aditya Medisales allegedly had transactions worth more than 5,800 crore with Suraksha Realty
  • Suraksha Realty is controlled by Dilip Shanghvi's partner in the company, Sudhir Valia.

Mumbai: A whistleblower complaint of governance concerns led to a steep fall in the shares of Sun Pharmaceuticals Industries Ltd on Friday. Sun Pharma share prices plunged 12.12% to 375.4 during the day’s trading, lowest since February 2013, before closing at 390.75, after a media report of a complaint by the unnamed whistleblower to the Securities and Exchange Board of India (Sebi) raised concerns on the drugmaker’s corporate governance.

The largest drugmaker by market value in India recorded its biggest intraday percentage drop since 29 May 2017 because of the complaint, published on Wednesday by Moneylife magazine.

The whistleblower alleged financial irregularities and related party transactions with Aditya Medisales Ltd, a privately-held distributor company for Sun Pharma. The complaint also alleged that Aditya Medisales Ltd had transactions with Suraksha Realty, which is controlled by Sun Pharma’s co-promoter Sudhir Valia, the report stated. The transactions took place between 2014 and 2017, and were worth more than 5,800 crore, it said.

Mint could not independently verify the whistleblower allegations.

After the fall in share prices, Sun Pharma uploaded its communication with Sebi on the BSE website. The company, in the letter to Sebi, sought an examination of the issue in its entirety. It also said there is a great asymmetry in the information circulating between analysts, investors and media, leading to intense speculation. It raised concerns about the contents of the complaint being shared with selective investors.

Moneylife is allowing institutional investors to examine the complaints after proving their credentials.

“The availability of information contained in the whistleblower documents to a set of selective investors does put other investors including retail investors in a disadvantageous position. We are concerned that certain entities/individuals are adopting unfair trade practices prejudicial to the interest of shareholders and other stakeholders," said Sun Pharma.

“It is evident from the fact that shareholders’ value has been drastically eroded within a short span of time due to unsubstantiated complaint/allegation against the company and mala fide campaign launched by certain media houses," the company said.

The top 10 mutual funds held more than Rs8,500 crore in Sun Pharma as of November 2018.

“While there are concerns, our funds are diversified enough that the net asset value of the fund would balance out and the impact of the fall in prices would be stabilized," said a fund manager with substantial holdings in Sun Pharma, who declined to be named.

However, J.N. Gupta, the founder of Stakeholder Empowerment Services, said the company is not doing enough to address investor concerns.

“The issue is two-fold: one to go into the veracity of the allegations. We would need to wait for Sebi’s examination whether these are genuine concerns before making an assumption. The selective dissemination of information also could lead to or mean unfair trade practices," said Gupta.

A whistleblower had approached Sebi late last year with a document alleging various financial irregularities by Sun Pharma, its promoter Dilip Shanghvi, Sudhir Valia, and Ketan Parekh scam-accused Dharmesh Doshi.

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