Sebi starts probe against Sun Pharma, to also reopen insider trading case

The Securities and Exchange Board of India (Sebi) has initiated an inquiry into the affairs of pharma major Sun Pharmaceutical Industries on the basis of a whistle-blower complaint, said regulatory sources.

The sources said the market regulator was in receipt of a 150-page letter in which the whistle-blower accused the company of committing corporate governance and tax-related lapses, besides other securities market-related violations.

When contacted, a Sun Pharma spokesperson said, “We have not been contacted by Sebi in this regard.”

Sebi, according to sources, also plans to reopen an insider trading case against the company and its promoters that was settled through the consent mechanism.

Sun Pharma, its Managing Director Dilip Shanghvi, and nine others had settled the insider trading probe, paying Rs 1.8 million against the settlement charges in 2017.

While Sebi had not disclosed details of the case, it was probably linked to the acquisition of Ranbaxy by Sun Pharma from Japanese drugmaker Daiichi. The regulator had agreed to settle the proposed adjudication proceedings linked to the violation of the internal code of conduct for prevention of insider trading. No enforcement action was initiated for the alleged defaults.

“The allegations raised by the whistle-blower are of serious nature. We will look into each one of them,” said a regulatory source.

Sources said Sebi had also taken cognisance of another note by Australia-based brokerage Macquarie on the faulty audit process and dubious practices used while raising funds through foreign currency convertible bonds (FCCBs). In 2004, Sun Pharma had launched a $225 million FCCB issue.

The foreign brokerage is learnt to have raised concerns about selecting a small-time London-based firm, Jermyn Capital Partners, to manage the issue. The Indian arm of this entity is believed to have had links with stock brokers Ketan Parekh and Dharmesh Doshi, both of whom had come under scrutiny for the market crash of 2002.

Besides, Sebi has referred the tax-related allegations to the Central Board of Direct Taxes (CBDT).

Earlier this week, the Sun Pharma stock touched a six-month low after a foreign brokerage raised concerns about corporate governance practices at the drug major. On November 28, the stock fell 3 per cent during the day, but recovered partially to close at Rs 486.35 apiece on the BSE, down 1.47 per cent. On Friday, the stock closed at Rs 492.3, up 1.84 per cent from the previous close.