Mumbai: Corporate governance issues will continue to linger in Sun Pharmaceutical Industries which is seeing a fresh turmoil after it emerged that there was a second whistleblower letter containing serious allegations of corporate governance lapses against company, said analysts.
"Till concrete steps are taken by company and regulators officially comment on whistleblower letter, investor concerns can linger on," said Nomura.
"If there are any resignations by board of directors or senior executives, it may be perceived negatively by market," it added.
Shares of Sun Pharmaceutical Industries fell more than 12% intraday on Friday to a six-year low after a financial advocacy website, which claimed to be in posession of a whistleblower letter against drug maker, shared details of purported complaint with some institutional investors.
The letter has highlighted Sun Pharma's dealing with subsidiary Aditya Medisales, according to institutional investors who have seen document.
Aditya Medisales is a pharma distribution company which is classified as a promoter shareholder of Sun Pharma with a stake of 1.6% as of December 31.
The stock ended up nearly 2% at Rs 398.35 on Monday after ending Friday's session with a decline of 8.5%.
Nomura said it expects company to take steps to address some of investor concerns and these include discontinuation of arrangement with Aditya Medisales and attempt to call back loans or advances extended to a pharma company in FY18.Jefferies, which recently upgraded Sun Pharmaceutical Industries to 'hold' from 'buy' also expects corporate governance issues to remain an overhang.
The firm had upgraded stock on expectations of recovery in business and supportive valuations.
"While governance issues could continue to be an overhang till an investigation is complete, prima-facie we see no concerns with business," said Jefferies.
At 17.6 times FY20 estimated earnings, risk-reward appears favourable as underlying business improves, it added.
The stock had hit a lifetime high of Rs 1,200.70 on April 7, 2015 and is down 67% since then.Bloomberg data shows that of 41 analysts tracking stock, 22 have buy rating, nine have hold rating and 10 have sell rating, while consensus target price is Rs 542.19, implying a potential gain of 36% from current level.