Sun Pharma To Settle Third-Party Loans, Take Over Promoter-Owned Distributor
Sun Pharmaceutical Industries Ltd. said its loan to a third party that sparked corporate governance concerns was part of its settlement with Atlas Global Trading after it failed to supply drugs because of U.S. regulator’s restrictions on its Halol plant.
The liability stems from Dubai-based Atlas Global assuming the damages on account of Protonix patent litigation settlement by Sun Pharma in 2013-14, India’s largest drugmaker said in a filing.
Aditya Medisales Ltd., the company’s distributor owned by promoter Dilip Shanghvi’s family, will also be merged with a subsidiary, Sun Pharma said. It also denied providing any loans or guarantees to Suraksha Realty Ltd., owned by its executive director Sudhir Valia, brother-in-law of controlling shareholder Shanghvi.
Shares of the drugmaker jumped as much as 4.34 percent, the most in nearly a month, after the announcement before trading began in Mumbai. The stock has tumbled 25 percent since November when a Macquarie trader’s sales note and reports quoting a whistleblower complaint raised concerns over the loans to Atlas Global—then an unidentified party. BloombergQuint also found that the disclosure about Aditya Medisales came at least a decade late. Moneylife later revealed part of the second whistleblower complaint alleging irregularities by the company, Shanghvi and Valia.
Here's how Sun Pharma responded to the concerns:
Sun Pharma will merge key distributor Aditya Medisales with its subsidiary, according to the company’s exchange filing. It will become a wholly owned subsidiary of Sun Pharma. The transition, subject to approvals, will be completed by June.
Unwinding Of Loans
Sun Pharma’s consolidated balance sheet showed loans worth Rs 2,238 crore to non-related party. The company, in its filing today, identified the company as Atlas Global Trading.
The matter dates back to 2013 when Sun Pharma settled patent infringement with Pfizer Inc., Wyeth LLC and Nycomed GMBH. A third party (now identified as Atlas Global) had assumed damages in that settlement, the Indian drugmaker had said in its annual report for 2013-14. In lieu of that, Sun Pharma agreed to supply products to the third party at a discounted rate. But the U.S. Food and Drug Administration’s ban on exports from the Halol facility halted the supplies.
Both the parties have now agreed in-principle that the loans and advances given to Atlas Global will be settled, according to today’s filing. The transaction is expected to be completed by March.
Change Of Auditors
Sun Pharma will replace Valia & Timbadia with SRBC & CO LLP (EY) as statutory auditors of its subsidiaries, according to the filing.
Valia & Timbadia were auditors to 16 of Sun Pharma’s 66 subsidiaries, according to BloombergQuint’s research. Hiten Chandulal Timbadia, partner of auditing firm Valia & Timbadia, has been involved in a stock-rigging case and his account was frozen.
No Loans, Guarantees To Suraksha Realty
Sun Pharma clarified that neither any loans nor guarantees were given to Suraksha Realty. The company said it does not have any financial transactions with the property developer owned by Valia, the executive director of Sun Pharma.