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This article is more than 3 year old.

Dilip Shanghvi assures investors highest levels of corporate governance, says will make changes to increase transparency

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Sun Pharmaceutical Industries Ltd on Monday denied any involvement into the insider trading case against the company and its promoters and reinforced that it followed higher level of corporate governance. "Let me clarify that Sun Pharma has not been involved in any insider trading norm violation relating to Ranbaxy deal,” Dilip Shanghvi, founder and managing director, said to CNBC-TV18.

Dilip Shanghvi assures investors highest levels of corporate governance, says will make changes to increase transparency
Sun Pharmaceutical Industries Ltd on Monday assured investors the highest levels of corporate governance and said the company will make changes in business transactions to increase transparency.
Dilip Shanghvi, founder and managing director, in a conference call, denied any involvement into the insider trading case against the company and its promoters and reinforced that it followed the higher level of corporate governance.
The MD's move comes after news reports said Securities and Exchange Board of India (Sebi) plans to reopen the investigation into the insider trading case against the company and its promoters that was settled through the consent mechanism.
The development comes after a whistle-blower reportedly approached Sebi with a document alleging various irregularities by the company, its promoter Dilip Shanghvi and others.
The company has not received any query from SEBI, Shangvi said, adding that the company will reevaluate certain business transactions if it helps improve investor confidence.
On concerns about Aditya Medisales, which handles Sun Pharma’s domestic sales, Shangvi said Sun Pharma's relationship with the firm is on an arms-length-basis and the arrangement helped the pharma major became tax efficient and in turn helped shareholders. But at the same breadth Shanghvi added that now that investors have raised concerns, Sun Pharma is open to changing the arrangement by either take over the distribution directly or buying Aditya Medisales itself.
Aditya Medisales has shown as a promoter entity in Sun’s shareholding pattern. Aditya Medisales holds 1.67 percent share as of September 2018.
While accepting that loans to certain employees (non-related parties) have increased significantly, Shangvi said, "If these loans are not being seen in the best interest of shareholders, we can re-look at them."
However, he did not disclose the names. According to the FY18 annual report of the company, loans and advances to non-related parties rose 124 percent to Rs 2,330 crore in FY18 compared with Rs 1,040 crore in FY17.
On audit firm Valia and Timbadia, Shangvi said, “One of the points related to an audit firm Valia & Timbadia wherein it was indicated that one of the partner of this audit firm was investigated in a stock rigging case. The matter being referred here is about 20 years old and none of the partners of the audit firm or the firm itself were a party to this investigation. They have been our auditors for a long time."
He also clarified that the audit firm audits some of Sun Pharma's small subsidiaries.
On the involvement of his brother-in-law Sudhir Valia, Shangvi said Valia is not involved in the operational business but advice the company on finance and strategy.
The reports suggested that the whistleblower letter to SEBI alleges irregularities with respect the to involvement of Sudhir Valia and his independent financial firms in Sun Pharma transactions.
On the alleged irregularities by the company’s promoters and others in raising funds through Foreign Currency Convertible Bonds (FCCBs), Shangvi said the older transactions were done with existing applicable laws and business interest in mind.
Shanghvi added that the insider trading case was settled with SEBI last August without admitting guilt and the unsecured loans given to certain individuals in early 2000s were based on then existing laws and were recovered.
While the move by Shangvi to clarify the issues is being hailed as positive but many concerns still remain unanswered, particularly on loans and advances to non-related parties and promoter intentions behind certain older transactions that involved tainted individuals.
Some analysts indicate that the tone and tenor of the call was like the company is accepting all the concerns. Overhang on the stock is expected as analysts do not see the concerns on corporate governance being eased so easily.
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