Mumbai: Shares of Indias largest drug maker, Sun Pharmaceutical Industries, tanked more than 12% intra-day to a six-yearlow Friday.
The sell-off came after a financial advocacy website, which claimed to be in possession of a whistle-blower letter against company, shared details of purported complaint with some institutional investors, market participants said.The letter has highlighted Sun Pharmas dealing with subsidiary Aditya Medisales (AML), a few institutional investors who claimed to have accessed document told ET.
It has also made allegations of money laundering and lending by AML to Suraksha Realty, a company promoted by Sun Pharma director Sudhir Valia, they said.Sun Pharma denied having received any new whistle-blower complaint and said certain media houses had launched a mala fide campaign by making unsubstantiated allegations against company.ET brings a low down on Sun Pharma subsidiary that is in middle of controversy: AML is a pharma distribution company whose directors are Ajay Dinesh Mehta, Pramanand Shivgunde and Darshna Devang Mehta.The company is classified as a promoter shareholder of Sun Pharma.
AML held 1.6% of Sun pharma as of December 31.Sun Pharma MD Dilip Shanghvi, on a conference call with investors last month, said companys domestic formulation sales worth Rs 8,000 crore in FY18 were undertaken through AML.According to regulatory filings by AML, its turnover for FY18 was just over Rs 8,000 crore.The arrangement with AML, Sun Pharma said, had been in existence for years.
But transactions with AML were not reported as related-party because, Sun Pharma said, it was not required to be classified as one prior to FY18.
Shanghvi told investors that AML had become a related party due to consolidation of Sun Pharmas shareholding among fewer entities.AMLs arrangement with Sun Pharma was unique because, typically in a pharma business, distributor is a third party, who buys stock from manufacturer and sells it to retailers over a margin fee.
In this case, Sun Pharma did not have to deal with a third-party distributor, if AML is considered as a related party.Among concerns that investors had raised last month were a loan of Rs 425 crore given by Sun Pharma to employees and others and transactions with AML.On conference call, Sanghvi said Sun Pharmas relationship with AML was on an armslength basis.
As investors have expressed concerns regarding this arrangement, we are in process of evaluating various options for undertaking domestic formulation business, he said at time.He hinted that board would look into buying out this entity if investors were not happy with arrangement.
Sun Pharma has yet to make any changes to shareholding and AML continues to be classified as a promoter entity.AML subsidiaries, according to public records, are Asawari Property and Prudent Natural Product.