A ₹1,085 crore one-time charge following a governance scandal hit profit
Sudhir Valia, brother-in law of founder Dilip Shanghvi, will become a non-executive director from whole-time director
NEW DELHI :
Sun Pharmaceutical Industries Ltd reported a 53% drop in quarterly profit after it took a ₹1,085 crore one-time charge, following a corporate governance scandal that also led to founder Dilip Shanghvi’s brother-in-law moving to a non-executive role.
Net profit fell to ₹635.9 crore in the quarter ended 31 March from ₹1,342 crore in the year earlier, India’s largest drug maker said in a stock exchange filing on Tuesday.
Sudhir Valia, brother-in law of Shanghvi, will become a non-executive director from whole-time director with effect from Wednesday. The move follows corporate governance allegations related to Valia raised by a whistle-blower. Sun pharma now faces an investigation by the Securities and Exchange Board of India.
A 150-page complaint by the whistle-blower filed with the capital markets regulator that emerged last November alleged various irregularities by the company and its promoters.
From 1 November till date, Sun Pharma has lost $5.4 billion in market value.
The whistle-blower letter highlighted Sun Pharma’s dealing with subsidiary Aditya Medisales Ltd (AML), a drugs distributor that is also classified as a promoter shareholder of Sun Pharma with a stake of 1.6% as of December-end. It alleged that AML had lent to companies run by Valia.
Concerns have since been raised by investors over whether AML made any gains in the past at the cost of Sun Pharma.
Sun Pharma discontinued its domestic business tie-up with AML and Shanghvi assured investors that shareholders were never disadvantaged in the transactions with AML. In order to deal with the allegations and further reassure investors, Valia stepped down to take a non-executive role, Sun Pharma said on Tuesday.
The company, in a media statement accompanying the filing, said the reported profit was not comparable with the fourth quarter of last year because of the one-time impact of distribution change for its domestic business.
“Sales for the quarter included a one-time impact of about ₹1,085 crore related to the change in distribution for India business," the statement said.
Consolidated revenue was ₹7,044.26 crore for the quarter under consideration, up from ₹6,711.01 crore for the same period a year ago.
“In spite of the one-time impact for India business, our full-year sales have grown by double digits. We continue to focus on executing our global specialty strategy," said Shanghvi.
Independent analyst Ambareesh Baliga said: “Though the numbers were lower than analyst expectations, but if accounted for the one-off sales adjusted due to change of distribution for India business, they offer some optimistic cues. US business has shown robust traction with 20% growth, especially when analysts had reduced weightage due to margin pressure. The whistle-blower complaint, which bogged down the stock in the last few months, seems to have relegated to the background, with no further information or development on the same."
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