The report quoted a Macquarie sales note by a trader on the company raised concerns over inadequate disclosures about the company's links with banned traders Ketan Parekh and Dharmesh Doshi
Brokerage firm Macquarie questioned corporate governance practices in Sun Pharmaceutical Industries, causing the drugmaker's shares to end at a six-month low on November 29, The Economic Times reported.
The report quoted a Macquarie sales note by a trader on the company raised concerns over inadequate disclosures about the company's links with banned traders Ketan Parekh and Dharmesh Doshi, related transactions, and role of promoter Dilip Shanghvi's brother-in-law Sudhir Valia, who is a Director in Sun Pharma. There were also questions about real estate guarantees given to Suraksha Reality.
The brokerage firm sought clarification on why little-known London-based firm Jermyn Capital was selected to manage Sun Pharma's $275 million foreign convertible bond issue back in 2004-07.
The note was shared through WhatsApp on November 27, following which the Sun Pharma stock fell 3 percent on November 28.
The company has firmly denied all the charges. "We understand that someone has compiled and circulated this information about Sun Pharma. The information, already available in the public domain, has been portrayed in a way to indicate that something inappropriate has been done by the company. We believe that we are in compliance with all provisions applicable to us," it said in a statement.
A spokesperson of the drugmaker also said that some of the information in the note is 10-15 years old.
After these developments, some FIIs may not be interested to invest in the company, a portfolio manager at a financial services firm was quoted as saying. He added that the stock will only react if some big FIIs dump the stock.
The note has inquired about the role of Lakshadeep Investments, a firm where Sudhir Valia is a shareholder. Macquarie has qualms about the fact that the entity is not listed as a promoter even though Valia reportedly has control over Sun.
The auditor of Lakshadeep is Valia's CA firm, Sudhir Valia & Associates, which Macquarie deems a huge conflict of interest.
The brokerage firm has observed many red flags in the pharmaceutical company over the years. "Most of these the street has already picked up on, including a sole distributor for Sun Pharma that is wholly owned by the promoter, its conspicuously low tax rate, and guarantees made by the company to a number of entities," the note read.
Regarding Jermyn Capital, the note said its Indian arm was found to have links with Ketan Parekh and Dharmesh Doshi, traders guilty of rigging share prices and causing a market crash in 2002.Sudhir Valia's Investment Trust of India, previously named Fortune Financial, lists Orange Mauritius as a shareholder. The latter is an FII sub-account of First International Group, which allegedly links to Doshi and Jermyn Capital.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.