Sun Pharma open to evaluating past decisions: MD

Sun Pharmaceutical Industries, India’s largest drugmaker, said that it will work towards re-establishing credibility and corporate governance which could include the review of some past decisions such as a $250-mn loan to employees and others and a possible buyout of a domestic company classified as a related party.

Sun Pharma’s Managing Director Mr. Dilip Shanghvi told investors in a conference call after his firm’s shares took a beating on the stock market, that his firm is committed to highest level of corporate governance.

The company’s shares have been falling since November 27 when a WhatsApp forward leaked details of brokerage Macquarie’s report containing allegations of corporate governance improprieties.

Mr. Shanghvi also said the company has not received any notice from the Securities and Exchange Board of India (SEBI) on a whistle-blower complaint containing allegations of insider trading. In a long chat with investors, the Sun Pharma founder said the firm could address some investor concerns by reviewing past deals such as unusually large loans given to employees and others.

“It is a structured transaction that we can wind up if required,” Mr. Shanghvi said responding to analysts’ query on this non-related party loan of $250-mn.

The Sun Pharma promoter also clarified on allegations that the domestic sales of the company were routed through a related party, Aditya Medisales Ltd. (AML). Mr. Shanghvi said that though the domestic formulation business transactions with AML existed for many years it was reported as a related party in FY18 as prior to this there was no such requirement.

Mr. Shanghvi also responded point by point to the research note by brokerage firm Macquarie that raised issues of corporate governance. “The points raised by securities firm pertains to information which are sourced from public domain and has been around for some time. Some of the issues are not related to Sun Pharma, some are incorrect, and some are old, as old as 15 years,” Mr. Shanghvi said. “The underlying theme of the note is to project serious underlying corporate governance issue in Sun Pharma. We follow highest level of corporate governance, which is in line with a global company like ours. And we are constantly striving to improve them,” he added.

Valia’s role and other concerns

Mr. Shanghvi defended and underplayed the role of whole time director and brother-in-law Mr. Sudhir Valia in the firm saying that he is only advising on finance, tax planning and strategic directions. Mr. Valia, he added, does not have operational involvement in Sun. Mr. Shanghvi also denied that the company gave any loans to Suraksha Realty, the firm promoted by Mr. Valia. “This is factually incorrect, Sun Pharma has not given any loan to Suraksha at any point of time,” he said.

On the 2017 settlement of the Ranbaxy insider-trading case, Mr. Shanghvi said the company per say was not involved in insider-trading and that the settlement happened on the procedural aspects of the trading window. As the Sun board meeting was held on Sunday, the lawyers advised that there was no need to announce trading window closure as it was a holiday. But markets regulator SEBI ruled otherwise and the matter was settled without any admission of guilt, he added.