Sun Pharma shares continue to decline

Sun Pharma stock is yet to recover from Wednesday's fall on the bourses when it hit a six-month low after a foreign brokerage firm raised concerns around corporate governance practices at the drug major. The stock was further down 1.31 per cent from Wednesday's closing in morning trade. 

The stock is currently trading at Rs 480 a piece on BSE. On November 28 Sun Pharma stock fell 3 per cent during the day but recovered partially to close at Rs 486.35 a piece on the BSE, down 1.47 per cent. 

An email sent to Sun Pharma was not immediately answered. 

In a social media message doing rounds since Tuesday afternoon, a trader of a foreign brokerage firm raised concerns over inadequate disclosures about Sun Pharma's links with banned traders like Ketan Parekh and Dharmesh Doshi, the role of Sudhir Valia, a director in Sun Pharma and also the brother in law of promoter Dilip Shanghvi. The note also raised concerns about real estate guarantees given to Suraksha Realty apart from seeking clarification as to why a little known London-based firm Jermyn Capital was selected to manage Sun Pharma's $275 mn foreign convertible bond issue back in 2004-07. Jermyn's Indian arm allegedly has links with Parekh and Doshi, two traders who have come under scrutiny for the market crash of 2002. 

Market sources claimed that the sales note is by a trader of Macquarie. However, this could not be independently verified. 

The note has raised questions surrounding the role of Lakshdeep Investments which is not listed as a promoter entity even when Sudhir Valia is a shareholder in the firm. Moreover, Lakshadweep's auditor is Valia's chartered accountancy firm. This is deemed a conflict of interest. 

Earlier, other brokerage firms like Edelweiss had also highlighted related party transactions in Sun Pharma. Edelweiss had noted about Aditya Medisales Ltd (AML), which accounts for 100 per cent domestic sales of Sun Pharma. There was an increase in quantum sales to AML from Rs 26 bn in FY17 to Rs 80 bn in FY18, which is 100 per cent of Sun Pharma's domestic sales in FY18, Edelweiss said. It added that Shanghvi Finance, in which Dilip Shanghvi and his spouse hold 100 per cent stake was merged with entities that are shareholders of AML, leading to an increase in stake and consequent classification as a related party.