Brokerage houses that had raised issues over corporate governance at Sun Pharmaceutical Industries are singing a different tune now, as a few firms that had downgraded stock have given it a buy rating once again.The reason for this turn of events, ET has learnt, is a direct meeting of Sun Pharma's top leadership team with large foreign institutional investors and high-net-worth individuals, assuring them about company's prospects.
The management had met FIIs like Goldman Sachs and Temasek post an investor call in December to give clarifications on several issues that had been raised by large investors over corporate governance issues, said people familiar with development.On Wednesday, brokerage firm Jefferies raised its rating on stock to buy from hold, saying that financials of company would see an improvement.
Although we remain cautious on success of specialty pipeline of Sun, we believe that with cost in base, there will be improvement ahead, Jefferies wrote in its research note.The brokerage put a target price of Rs 535 on Sun Pharma.
The target is Rs 370 for a worst-case-scenario, which it said now looked limited.
The rating upgrade is also because Jefferies believes Sun Pharmas specialty pipeline will start generating revenue.
On Wednesday, stock closed 0.3 per cent higher at Rs 453.35 on BSE.The stock has corrected over 10 per cent in two months on concerns around whistle-blower allegations and potential investigations.
On corporate governance side, Jefferies wrote that although most of issues appeared dated, it might remain an overhang for now until clarity on investigation emerged.
The key risks for company remains slower ramp up at its Halol plant and specialty execution.On Wednesday, brokerage firm Karvy put a buy rating on Sun Pharma.
Last week, Kotak equity upgraded stock to add from sell citing reasonable valuation.
It gave fair value at Rs 475.Market regulator Securities and Exchange Board of India in late 2017 opened an investigation against company over an anonymous whistle-blower complaint.
Then, Macquarie, in a research note, raised concerns over what it cited Sun Pharmas past links with banned traders and conflict of interest by promoter family, among several other issues.
The fall in companys share price led to an erosion in promoter Dilip Shanghvis net worth.
Sun Pharma had denied all allegations and said company maintained highest standard of corporate governance.