Ready to evaluate structures and transactions to assuage investor concerns: Sun Pharma

Sun Pharma, facing questions over its corporate governance practices, said it follows high level of corporate governance and is even ready to evaluate some of the structures and transactions to assuage concerns of the investors.

The drug maker's shares on December 3 dropped 7.52 percent to close at Rs 455.30 earlier in the day on concerns over corporate governance.

"Some of the issues are not related to Sun Pharma, some issues are factually incorrect and some issues are very old dating back as much as 10-15 years old. Let me reinforce that we follow high level of coporate governance at Sun Pharma, which is expected from a global company of our size," said Dilip Shanghvi, Managing Director of Sun Pharma, referring to a note circulated by Australian brokerage house Macquarie to investors.

Shanghvi further added that the company is constantly evaluating how to further strengthen corporate governance to meet investor expectation and also changing regulatory environment.

On loans worth $250 million to non-related parties, Shanghvi said  he will not be able to give more details at this stage, but said it is a structured transaction and loans were given to pharmaceutical related activities on commercial terms at market rates.

Shanghvi said the company will wind-up these transactions, if shareholders aren't happy.

On the whistleblower's compliant Shanghvi said he has not received any  query from SEBI on the complaint.

A PTI report, quoting sources, said SEBI plans to reopen the investigation into the insider trading case against the company and its promoters that was settled through the consent mechanism.

Sun Pharma, along with its Managing Director Dilip Shanghvi, and nine others had settled the insider trading probe, paying Rs 18 lakh against the settlement charges in 2017.

The whistleblower alleged that Sun Pharma promoter have gained around Rs 8000 crore through insider trading.

Shanghvi rejected the allegations and said the company hasn’t been involved in any insider trading norm violation relating Ranbaxy deal.

However he added there was some minor technical issue relating to a procedural aspect of trading window closure due to intervening holidays.

“This case was settled with SEBI without admission of guilt, in accordance with the provisions of the applicable law and the matter was closed. Also important to note that none of the insiders traded in Sun Pharma stock were not announced,” Shanghvi said.

On Aditya Medisales Limited (AML) – the company owned by Sun Pharma promoters that undertook the company’s domestic formulation business, Shanghvi said the relationship with AML is on an arms-length basis and was entered to make the company tax efficient.

Shanghvi said the shareholders have benefited with this arrangement through single digit tax rate, but the company is open to change the arrangement with AML, following investors' concerns.

Sun Pharma said it may consider taking over the distribution directly or buy AML.

The financials of AML doesn't enjoy any significant profitability.

On alleged real estate guarantees given to Suraksha Realty,  a firm promoted by Sudhir Valia, Whole Time Director of Sun Pharma , Shanghvi said the company has never given any loan or guarantee at any point to the said entity. Valia is brother-in-law of Shanghvi.

When asked  why a little known London-based firm Jermyn Capital was selected to manage Sun Pharma's $275 million foreign convertible bond issue back in 2004-07, Shanghvi said that JP Morgan was the lead manager of the FCCB issue and also at that time, Sun Pharma was only a Rs 1100 crore company, which is 3 percent of its current turnover.

"In the last 10 years regulatory scenario has changed, so to apply these things retrospectively will put unreasonable burden on us. The law that we follow, is the current law. If tomorrow we grow bigger things will change again, I want you to factor this as a business reality," Shanghvi said.