Sun Pharma whistle-blower report: All eyes on SEBI's decision that could impact India Inc at large

To pinpoint any wrongdoing that Sun Pharma allegedly embarked upon, it is first necessary to get a fix on what the whistle-blower says. Much now depends on what SEBI chooses to do.

India's biggest pharma company, Sun Pharma has moved the Securities and Exchange Board of India (SEBI) as its share price on the bourses took a big hit. It tumbled to a six year low last Friday (January 18) over word of a fresh report alleging wrongdoings by the company. This referred to Sun Pharma's distributor Aditya Medisales' dealings with Suraksha Realty, that is controlled by Sun's co-promoter.

But to pinpoint any adventure that Sun Pharma allegedly embarked upon, it is first necessary to get a fix on what the whistle-blower says. So far, the contents of the two voluminous whistle-blower documents are still not known and arguably every journalist and investor is trying to get their hands on them. Much now depends on what SEBI chooses to do.

However, look at the issues being discussed - related party dealings, tax management and corporate governance - and they seem matters that should concern every corporate house. Some that Business Today spoke to are already keen to know the real reasons and regulatory treatment it should get.

As one corporate leader, curious, concerned and unclear, told Business Today, on the condition of anonymity, that the real question that we need to get an answer to was: "Is this all an outcome of some tax management issue that backfired or is there a serious corporate governance failure here?"

A tax plan gone wrong will, of course, have questions about the intent, whether mala fide or not, but any slippage in corporate governance would be quite a serious matter requiring a different treatment. Nobody seems to have a clear answer, at this moment at least. But since it concerns the biggest Indian pharma company, it is a matter that can hardly be ignored.

In an investor update call on December 3, after news came out about the first whistle-blower document, Dilip Shanghvi, the founder and managing director of Sun Pharma, tried to allay investor fears over any slippages in corporate governance within the company. In that investor call, among other things, he also mentioned: "I have always looked at finding a way by which to create a more tax efficient structure, and I think creating that through Aditya Medisales Limited (AML) has helped."

He then went on to add: "Clearly the decision to do this in my head is with a view to help Sun Pharma become more successful, not with the view to do anything else. So if that is not something which is shared by our other shareholders then we are open to make changes."

Is it all about effecting changes now to allay investor concerns or is it more complex? All eyes now would be on what the company  opts to do and how the regulator responds, for there could be implications and lessons for India Inc. as a whole and not just Sun Pharma.

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