Did Sun Pharma Conference Call Deny, Clarify or Actually Muddy the Issues?
On Monday, Sun Pharmaceutical Ltd held a conference call with analysts and investors where it sought to clarify the issues raised by a whistleblower (reported only in Moneylife and later picked up by the Press Trust of India, which led to a 7.52% decline in the share price on Monday), as also by an earlier report by Macquarie Securities. Dilip Shanghvi made some introductory remarks and then took questions from those on the call. 
 
However, Mr Shanghvi failed to address any of the issues effectively. Interestingly, one analyst from DSP Mutual Fund, seemed more keen on instigating Mr Shanghvi to sue Moneylife for defamation and invalidate the whistleblower, rather than to focus on his (the whistleblower’s) findings about Sun Pharma’s dealings. To his credit, Mr Shanghvi did not rise to the bait. 
 
Here is a select list of some of the sharper questions posed and rather waffling and weak responses of Mr Shanghvi. He simply did not reply to some of the questions. To some others, all he said was he was “open to make changes,” a rather dubious response which suggests a lack of conviction behind many of the company’s decisions. This even led to a caller asking whether he now believes, with the help of hindsight, that these decisions were wrong. We have collated some questions and replies and leave the readers to judge for themselves.
 
(Disclaimer: the interactions have been edited.)
 
On Loans & Advances Given 
 
Wesley John Wong: …Certain loans were made at market rates. Can you be more specific… on a year-on-year basis, there has been an increase from Rs670 million last year to Rs22.4 billion or almost $350 million. Can you explain the nature of this $350 million loan—who was it linked to and why?
 
Dilip Shanghvi: What is the question?
 
Wesley John Wong: The question is about the nature of the of the Rs22.4 billion worth of loans made to employees/others and published on page 162 of your annual report.
 
Dilip Shanghvi: Yeah. So, that's – that's what I said—that it's a business loan given to a non-related party which has increased significantly and I think, we've been interacting and talking to shareholders over some time… I mean…if there is a sense if this is not in the best interest of shareholders, then we will see what best we can do to reverse the transaction if that becomes necessary.
 
Wesley John Wong: That wasn't my question. My question is what is it? What is the nature of it, whom are you lending to?
 
Dilip Shanghvi: Yes, so I think this challenge which I face generally in responding to questions is that there is information which is material to the interest of business. So I can't share some materially important information…. So I am not able to give you more information about whom the money is given to; however, I understand the concern which you have and we will try and address this concern at the earliest.
 
Anubhav Aggarwal: …How did you take a call that investing almost $300 million plus…for more than two years is a better call? Was this investing…or charity or… what was the thought process there because you are not sharing how much of which industry you put money into, you're not sharing how much of. . . . 
 
Dilip Shanghvi: …I'm not giving you specific information… I think I'm clarifying all other issues. As to the judgment about whether this money would have been better used somewhere else…we get a sense that if that is an important requirement for investors, then we will find a way to unwind this transaction.
 
Anubhav Aggarwal: So when you say market interest rate, can you give us some indication of what kind of yield you were generating, broader indicator, because in the annual report you mentioned 0% to 15%, isn’t that's a very broad range?
 
Dilip Shanghvi: But I think when you have conditionality in transactions, then it's difficult, because… certain things… are contingent, so if something doesn't happen, then it is lower; if something happens, then it will be higher.
 
Anubhav Aggarwal: Okay. Is this a listed pharma company or a non-listed pharma company?
 
Dilip Shanghvi: I'm not able to give further information…
 
 
Connection with Dharmesh Doshi and Jermyn Capital, Ketan Parekh associate
 
Sameer Baisiwala: …even if JPMorgan was the lead book manager, why have someone, Jermyn, as your co-book runner (on the 2004 foreign currency convertible bond (FCCB))? Is it true (what the) article suggests is as per SEBI's order of 2001, that Jermyn had connections with Ketan Parekh and Dharmesh Doshi? 
 
Dilip Shanghvi: So, Sameer, I think I'm not able to respond because these are old sets of information, so we don't have this information with us… in 2004, when we raised the FCCB we were only a Rs1,100-crore company…in the past 14 years, regulatory framework, laws, expectations of transparency, corporate governance everything has changed significantly. So to apply them today with retrospective effect and revisit many of the decisions which the management… I think this will put an unreasonable burden on people…
 
On Aditya Medisales Being a Related Party
 
Nimish Mehta: Aditya Medisales, you mentioned that till FY 2017 it was not a part of the related group – related parties. Now, in FY 2018, has it become so…what changed between FY 2017 and FY 2018?
 
Dilip Shanghvi: …In 2017, we took shareholder approval in the AGM for continuing to get the distribution business through Aditya Medisales as a related party and that was also a transaction which was approved by more than 95% majority of the independent shareholders. Now if it is felt that that is not in the best interest of the shareholders because there are now some concerns that were missed at that point of time, we are open to make changes.
 
Nimish Mehta: … So before that merger happened, who was the promoter of Aditya Medisales?...All the promoters of Sun Pharma would be the promoters of Aditya Medisales too, so before that who was the promoter?
 
Dilip Shanghvi: No. I think that the equity was held in different investment companies and these investment companies got consolidated.
 
Anmol Ganjoo: So, the logical conclusion would be that, of course, from the benefit of hindsight that, indeed some of these transactions were best avoided.
 
Dilip Shanghvi: No. That's not what I'm saying. I am saying that I will – we will discuss with investors and try and explain to them as to what we think is the benefit. And then if they still feel that this is not something which they feel is useful, then maybe look at what are the options for us to revert to a more commonly acceptable operational process.
 
The most interesting question from our perspective came from Aditya Khemka of DSP Mutual Fund who seemed to be keen for Sun to file a defamation case against us:
 
Aditya Khemka: …clearly there is a media company which has put the press out. Can you sort of go after them to seek more clarification about why they wrote in your name, maybe a defamation lawsuit? 
 
Dilip Shanghvi: I mean, in this sense that I think my first and important priority is to address the concerns of the investors, as well as work towards re-establishing the credibility that we have historically enjoyed as a company with high levels of corporate governance norms. That I think is my priority.
 
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COMMENTS

kpushkar

2 weeks ago

Seems like typical politician speak....Surprised and not so surprised ,considering that sanghvi wants to keep it in family .. a Pvt Ltd company..

Lalit Mulay

2 weeks ago

Is the Sun about to set.

sreekanth reddy

2 weeks ago

Good work moneylife, One question when was the copy available with moneylife was it in september when it was emailed or recently...

Neeraj

2 weeks ago

Wow ! So evasive - makes them look guilty as charged. Would have been better to speak clearly, honestly to all, and specially to Moneylife. I dont expect businessmen to be honest in general, but this looks like a wink and rob story !

Ramesh J. Modi

2 weeks ago

Can the actions taken by Chairman be treated as criminal in nature?

Old is Gold

2 weeks ago

Good question asked.
Keep it continues..

It needs to be answered asap..

Ramesh Bajaj

2 weeks ago

Moneylife is courageous!

Subbarao

2 weeks ago

Thank you Moneylife for watching out for investor interest and improving transparency. What can I do in addition to subscribing?

Aditya Singhal

2 weeks ago

This is unbelievable! I am sure if a General Manager or a FM would have given such responses in an internal review meeting, he would have got fired for giving such ridiculous responses

Ramesh Poapt

2 weeks ago

Sun Eclipse ! Sunset?

Pankaj Thuain

2 weeks ago

Well articulated and structured.

G SANTANU KUMAR DORA

2 weeks ago

Well done team Moneylife...

Harish Kohli

2 weeks ago

There is an open onslaught of Moneylife. I am sure you will, despite the money power behind it, not deviate from the chosen path.

GSK Consumer Healthcare to merge with Hindustan Unilever
FMCG major Hindustan Unilever on Monday said it will merge GlaxoSmithKline Consumer Healthcare Ltd with itself for an all equity transaction worth Rs 31,700 crore.
 
The deal would bring the brand of Horlicks, a malted-milk, in Hindustan Unilever's portfolio.
 
As per the deal, GSK Consumer's shareholders would get 4.39 shares of Hindustan Unilever's shares for each share they held in GSK consumer Healthcare, a regulatory filing by Hindustan Unilever said.
 
The company said: "We will drive significant cost synergies from a combination of supply chain efficiencies and operational improvements, go-to-market and distribution network optimisation, scale in a number of cost areas such as marketing and streamlining of overlapping infrastructure."
 
Commenting on the merger, Sanjiv Mehta, Chairman and Managing Director, Hindustan Unilever said: "The turnover of our F&R (food and refreshment) business will exceed Rs 100 billion (10,000 crore ) and we will become one of the largest F&R businesses in the country."
 
Following the issue of new Hindustan Unilever shares, Unilever's holding in the company will be diluted from 67.2 per cent to 61.9 per cent.
 
The merger includes the totality of operations within GSK Consumer Healthcare India, including a consignment selling contract to distribute GSK CH India's Over-the-Counter and oral health products in India.
 
The transaction is expected to be completed in one year subject to regulatory and shareholder approvals.
 
The announcement of the merger lifted the stock price of both the companies. Shares of Hindustan Unilever closed at Rs 1,825.90 apiece, up Rs 72.30 or 4.12 per cent from the previous close.
 
Similarly, shares of GSK Consumer Healthcare settled 3.75 per cent or Rs 272.90 higher at Rs 7,542.85 per share.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

archana_rahatade

2 weeks ago

Good work done by Moneylife. Really appreciate your efforts.

Whistleblower Files 150-Page Complaint with SEBI about Sudhir Valia Group, Dilip Shanghvi and Sun Pharma
In a sensational 150-page document, a whistleblower has alleged numerous irregularities against Sun Pharma, its main promoter Dilip Shanghvi and his brother-in-law Sudhir Valia, Mr Valia’s independent financial operations, Fortune Financial and Investment Trust of India and Dharmesh Doshi, an associate of Ketan Parekh who has been convicted of wrongdoing in the stock market scam of 2001. 
 
Moneylife has a copy of this document filed with the regulator in mid-September.  Copies have been marked to the chairman of the Securities and Exchange Board of India (SEBI) Ajay Tyagi and whole-time directors Madhabi Puri Buch, G Mahalingam and Ananta Barua. Sun Pharma, in an official response to Moneylife has said that it has not received any query from the regulator so far. 
 
 
Separately, a note by Australian brokerage house Macquarie, which raised several questions about the practices by Sun Pharma and its curious connections with tainted entities, has already gone viral on social media. The Economic Times has since reported some of these along with a denial by Sun Pharma. When we shared the screenshots of the whistleblower’s note, the brokerage note and asked about the whistleblower’s document, sun Pharma's response was as follows:
 
1. "We have not been contacted by SEBI with regards to any such whistle blower complaint” 
 
2. “The points raised pertain to historic events, some of which are dated as far back as 10-15 years. Certain points raised are incomplete and have been presented in a negative manner. The supporting information to the points has been sourced from public domain and hence this information/data is already available in public domain. We believe we are in compliance with all the legal/regulatory provisions applicable to us.”
 
The document sent to SEBI goes far beyond the Macquarie note. It contains sensational allegations of insider trading, using State machinery to arm-twist target companies, using funds raise by opaque foreign currency convertible bonds, booking notional losses to save on tax payment among the charges. 
 
In this article, we are only mention that a whistleblower document has been sent to the regulator. We will leave the more sensational allegations for the regulator to investigate. 
 
Moneylife was the first to have flagged off the case of a possible insider trading during Sun Pharma’s takeover of Ranbaxy The whistleblower alleges that in the Ranbaxy insider trading case, there was a gain of as much as Rs8,000 crore. 
 
In 2017, the Times of India reported that Dilip Shanghvi, Sudhir Valia and others have settled the insider trading charge by paying a paltry Rs18 lakh. https://timesofindia.indiatimes.com/business/india-business/sun-pharma-10-others-settle-insider-trading-case-with-sebi/articleshow/60023171.cms
 
The SEBI settlement order, however, is extremely sketchy with minimal information about the nature of wrongdoing: https://www.sebi.gov.in/enforcement/orders/aug-2017/settlement-order-in-respect-of-sun-pharmaceutical-industries-limited-and-10-others_35604.html
 
The whistleblower now names a host of foreign entities such as Bomin Finance Ltd, First International Group PLC, Orbit Investments PLC, Sun Global Investments Ltd, Orange Mauritius Investments Ltd., Hypnos Fund Limited, Elm Park Fund Ltd, Asia Advantage Fund, ITF Mauritius, etc, as being involved in questionable transactions in the Indian equity market. 
 
He writes, “These are some direct links, and some others which are carried out through relationship arrangements. For example, I will deal on your behalf and you will deal on my behalf. We will settle our account at the end of year in net negative or net positive through international markets. There are other arms in International market as well which I am not covering here.”
 
Coming out of the shadows of Dilip Shanghvi, Sudhir Valia has charted an independent course for himself through a series of acquisitions of brokerage firms, investment banking firms, advisory firms such as Fortune Financial Services India Ltd (FFSlL), Inga Capital and Antique broking and Investment Trust of India (ITI). All these vehicles are allegedly used by the group for various questionable financial transactions, alleges the whistleblower.
 
The 150-page document has names, phone numbers, bank account statements and complex organisation charts of hundreds of companies, foreign investors and individuals that are acting in concert. 
 
In the covering letter to the SEBI chairman and the whole-time member, the whistleblower mentions that “for me to reach to this level of detailed letter to you along with the evidences gathered over a period, has taken an extraordinary level of efforts at my end and weeks of data compilation. Further it has added lot of risk to my family, my life and my family’s future."
 
The whistleblower claims to be “very closely connected to the people mentioned… My association with this set of people has been for more than 23 years now and I am directly working with them for 15 years and currently as a senior executive with the group. In my career with them, I have handled their Romania, Israel, USA and Mauritius operations directly.” 
 
He claims not to be a beneficiary of the operations described “regularly drawing salary as my primary income and has never had anything beyond that during my entire tenure. The very reason I have decided to share this is because there are some deals that have gone bad and to cover them up from difficult questions coming along, now the management is asking the professional staff to front that event which I am not ready to do. Therefore, over a period of 6 months, I have gradually gathered all relevant evidences to present my case and bring out a rightful conclusion to this episode.”
 
Macquarie, in its note to clients had said, “Sun Pharma, its auditors, its subsidiaries and interesting links to certain individuals, FPI entities, market manipulation cases, lending activity.” It raised questions about who audits the Sun Pharma subsidiaries including Green Eco Development, Fastone Mercantile, etc. The auditor apparently is Valia and Timbadia whose partner Timbadia had been involved in a stock marketing rigging case. 
 
The note also asks why Sudhir Valia’s own chartered accountancy firm had been auditing the firm he controls, Lakshdeep Investments, till 2017. The firm now shows Sanjay Valia as the proprietor, who had been involved in a price manipulation case of a stock Maa Leafin & Capital and barred from the securities markets in 2002. https://www.sebi.gov.in/satorders/pareshparekh.html
 
The Macquarie note also questions why Sun Pharma appointed a “tin-pot financial services firm, Jermyn Capital,” to manage its landmark FCCB transactions from 2004-2007? 
 
“Sun Pharma raised $275m in the first tranche of FCCBs. Let’s just mull this over for a minute. In the biggest fund raising transaction, Sun Pharma hired a small shop based out of London to co-manage the issue. Even global brands like Macquarie struggle to get deals. That’s not it though… this Indian arm of this entity was found to have links with Ketan Parekh and Dharmesh Doshi (two of the biggest stock KNOWN market manipulators in India). As the SEBI order states: There are linkages between Jermyn Capital LLC, Jermyn Capital Partners Plc (hereinafter referred to as ‘Jermyn Plc’) and Dharmesh Doshi/Ketan Parekh.”
 
With his supposedly intimate knowledge of the operations of the group, the whistleblower claims to have the answer. “When the (2001 Ketan Parekh) scam was out and Dharmesh Doshi fled to London, UK, he would have never gained strength without the active assistance of Dilip Shanghvi who awarded the work of two to three major rounds of Foreign Currency Convertible Bonds of Sun Pharma during that period between 2002 to 2007 to Jermyn Capital LLC controlled by Doshi.” It is a fact that one of the promoter entities of Sun Pharma had previously lent to Ketan Parekh. https://indiankanoon.org/doc/128780206/?type=print
 
 
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COMMENTS

Praveenvegunta Babu

1 week ago

Reliable & trust worthy information in the site .

VIVEK SHAH

3 weeks ago

As has been pointed out earlier too the Consent machanism adopted by SEBI is utterly useless. The fraudster gets away paying peanuts as fine without admission of any wrong-doing.
Sun Pharma indulging in such questionable activities is surely shocking. One certainly prays that they aren't indulging in malpractices in their core business of selling medicines some of which are life saving drugs.

Ritesh SARAF

3 weeks ago

Let's not be judgmental and allow the authorities and Sun Pharma to interact and wait for the outcome. Sun Pharma is paying salaries via employment to more than 50000 Indians including the whistle blower.

Krishnan Hariharan

3 weeks ago

Sun Pharma was a highly respected and fast developing company, once. The whistleblower accusations show they too are no different than Malaysia and Chokshis. Slowly one gathers the impression that Indian corporates are only floating ventures to gain wealth by dubious and fraudulent means. It will not be surprising more and more skeletons of Kingfisher like scams tumble out of the corporate cupboards. This, by the way, proves that our regulators like SEBI are ineffective and show least interest in doing their job, rendering our investment in shares of these companies highly risky. Can we ever hope to see fair and honest dealings in the corporate world?

baldev aildas

3 weeks ago

Sunpharma cannot be trusted anymore. It has betrayed its Shareholders.

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