Sebi bars API maker Par Drugs from slump sale, orders independent valuation and fairness opinion

Sebi Bars Par Drugs from Proceeding with Slump Sale, Orders Independent Valuation and Fairness Opinion

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26 Aug, 2025 12:21

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Capital Market regulator Sebi has restrained Par Drugs and Chemicals (PDCL) – a maker of active pharma ingredients - from proceeding with the proposed slump sale of its business to promoter-related entity PJFCP under a Business Transfer Agreement (BTA) dated February 14, 2025.

The move comes amid concerns over non-compliance with disclosure norms and potential prejudice to public shareholders interests.

Sebi’s interim order has directed the NSE to appoint a registered valuer to independently assess the fair market value of the business undertaking that is slated for transfer. The valuation must adhere to recognized standards and appropriate methodology, said Sebi. The appointed valuer is required to submit the valuation report within three months of the order date, following which the NSE must obtain a fairness opinion from a merchant banker within one month of receiving the valuation report.

Both the valuation report and fairness opinion, along with NSE’s recommendations, must be submitted within 15 days of the fairness opinion’s receipt.

Sebi’s interim order passed by Whole Time Member Kamlesh Chandra Varshney said, “PDCL is restrained from effecting the transactions agreed upon in the BTA dated February 14, 2025 for Slump Sale of its business undertaking to PJFCPL.” He further said, “If the proposed slump sale transaction is allowed to proceed, it could cause grave injustice to the public shareholders since the transaction would become irreversible upon execution.” Varshney justified the interim order and said, “I find that there exist sufficient grounds to form a prima facie opinion that the proposed slump sale transaction by PDCL may be detrimental to the interests of public shareholders and warrants urgent intervention by SEBI in form of interim directions.”

The Interim order noted that prima facie findings of investigations have made a compelling case for passing directions, given the possible violations of the provisions of Sebi’s Prohibition of Fraudulent and Unfair Trade Practices Regulations, 2003, and Listing Obligations and Disclosure Requirements Regulations, 2015 and other laws.

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The order follows a complaint alleging that PDCL’s slump sale is being executed at an artificially low valuation to benefit promoter-related entities at the expense of public shareholders. It was claimed that the slump sale would result in the transfer of the company’s core profit-making business on undervalued terms, which had already led to a significant erosion of PDCL’s market capitalization.

Sebi’s preliminary investigation revealed that the valuation reports submitted by PDCL focused exclusively on six physical assets, including industrial land, office premises, and plant machinery. No value was attributed to intangibles such as employees, goodwill, brand equity, or technical knowledge, which are core elements of a profitable going concern.

The financial data from PDCL over the last five years has shown consistent positive operating as well as net profit, underscoring that standard industry practice requires business valuation to reflect the going concern’s value, rather than just individual assets. Sebi said the valuers were seemingly instructed to treat the slump sale as a mere sale of separate assets, in contradiction to the Business Transfer Agreement, which clearly described the transfer of the entire business undertaking as a going concern.

PDCL’s market capitalization plummeted from Rs 428.76 crores before the slump sale announcement in December 2024 to Rs 139.74 crores by September 2025, a decline of nearly 70 percent. The stock price experienced sharp fall in correlation with major slump sale events, including the announcement of the board’s decision, the outcome of two extraordinary general meetings (EGMs) and the final shareholder approval of the transaction.

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The order further directed PDCL, its management and all signatories to the BTA to immediately cease and desist from any alienation of the business’ assets, pending further orders. The company is also mandated to fully cooperate with the independent valuer and submit all information and documents as required.

PDCL has 21 days to file its reply or objections to the Sebi order and may request a personal hearing.