Sun Pharma Tuesday announced a slew of measures, including replacement of its domestic formulations distributor Aditya Medisales and change of auditors for its arms, in the wake of a second whistleblower complaint that raised corporate governance issues.
The company also announced the settlement of a transaction amounting to Rs 2,238 crore with Atlas Global Trading -- with which it had a supply agreement -- that had arisen out a patent litigation settlement over Protonix.
Last week, Sun Pharmaceutical asked market regulator Sebi to look into the issues of certain entities and individuals allegedly adopting unfair trade practices prejudicial to the company's shareholders.
"Sun Pharma's distribution related to India domestic formulations business shall be transitioned from Aditya Medisales Ltd, the current distributor, to a wholly-owned subsidiary of Sun Pharma," the company said in a BSE filing.
Aditya Medisales is reported to have had transactions of over Rs 5,800 crore with a real estate firm, Suraksha Realty that is promoted by Sudhir Valia, who is the brother-in-law of Sun Pharma promoter Dilip Sanghvi. Valia is also an executive director in the pharmaceutical major.
Announcing the steps taken, Sun Pharma said its distribution related to domestic formulations business in India shall be transitioned from Aditya Medisales Ltd to a wholly-owned subsidiary of Sun Pharma.
"This change will be made effective by Q1FY20, post receipt of all requisite regulatory approvals," the company said without disclosing the reasons for the change.
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Sun Pharma further said it "has initiated steps to induct SRBC & CO LLP, its statutory auditors, as auditors of subsidiaries that are currently audited by Valia & Timbadia".
Regarding unwinding of the transaction with Atlas Global Trading, Sun Pharma said, as of March 31, 2018, the company's consolidated balance sheet, reflected a liability towards obligation of supplies to Atlas Global Trading amounting to Rs 2,238 crore.
"This liability was in respect of Atlas assuming the damages on account of Protonix patent litigation settlement entered by Sun Pharma," it said.
Sun Pharma was unable to fulfil its supply agreement with Atlas after its Halol facility in Gujarat failed to comply with USFDA norms in 2014.
Subsequently, in 2017-18, Sun Pharma said it had "funded Atlas towards non-fulfilment of its supply obligations till the time such obligations are fulfilled as per the agreement".
The company said the parties to the supply contract have now agreed "in principle, that Atlas will assign its rights and obligations arising from this contract to a wholly-owned subsidiary of Sun Pharma".
"This assignment will ensure that the loans and advances given to Atlas will be settled. On conclusion of this transaction, in the consolidated balance sheet, this loan and the obligation will cease to exist as it gets squared up. This transaction is expected to be concluded in 2018-19," the company added.
Refuting report that suggested Sun Pharma had financial dealings with Suraksha Realty, a firm promoted by Valia, the pharma major said "neither any loans nor guarantees have been given to Suraksha Realty.
"Sun Pharma would like to dispel all falsehoods being spread about its financial dealings with Suraksha Realty. The company states unequivocally that it does not have any financial transactions with Suraksha Realty".
Last week in a letter to Sebi Chairman Ajay Tyagi, the Mumbai-based drug maker had said it has come to know from a media report that a second whistleblower complaint has been filed against the company.
"We are concerned that certain entities/individuals are adopting unfair trade practices prejudicial to the interest of shareholders and other stakeholders," the company had said in the letter, a copy of which has been submitted to the stock exchanges.
In November 2018, a whistleblower had approached Sebi with a document alleging various irregularities committed by the company, its promoter and others.
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