REPORT

ON
SUNPHARMACEUTI
CALSPRI
VATELI
MITED:
CORPORATEGOVERNANCE

Submi
tt
edt
o

Dr
.Ut
kar
shGoel

By

Shi
vam KumarSi
ngh(
IMB2018004)
I
ntr
oduct
ion
I
ncompl
i
ancewi
thr
egul
ati
on34(
3)f
orsecur
it
iesandexchangeboar
dofI
ndi
a.
Thepr
esentst
rengt
hoft
heboar
dofdi
rect
orsofcompanyi
sel
even.Fewar
eli
stedas

Thekeypr
inci
pleofcor
por
ategov
ernancephi
l
osophyar
e
1.Hi
ghl
evel
oft
ranspar
ency
2.Account
abi
l
ity
3.Consi
stentv
aluesy
stem
4.Del
egat
ionofr
esponsi
bil
i
tiesacr
ossal
lfacet
sofoper
ati
on

CodeofConduct&Pol
i
cy
AtSunPhar ma,wenur t
ur eanenv ir
onmentofper sonalandpr of essi
onalgrowt hforour
empl oyees,butt heiradher encet oourCodeofConductr emai nsnon-negot iable.Our
Codepr ov i
desadet ai
ledill
ustrati
onofhowourempl oyeesmustactandhowsi tuati
ons
arisingf r
om conf l
ictofinterestmustbedeal twith.Alongwi ththeCode, variouspol i
cies
onsi gnif
icantsubjectsar edesignedt ocov erallareasofoper ations.Inordert or emai n
abr eastwi ththebestst andar dsofgov ernance,wecont i
nuousl yupdateourpol i
cies
witht he ev ol
ving env ironment .We al so actively sol
icitf eedback from al lour
stakehol dersonourbusi nessconduct ,andkeepourcodeandpol i
ciesupdat ed.I nthis
repor ti
ngy ear,
wer eceiv
ed6st akeholderconcerns, al
lofwhi chhav ebeenr esol ved.
Theshadeofcor porat
eadmi nist
rati
oni ssueslookedbyI ndia'
sbi ggestmedi cat
ion
producerSunPhar mamaynotl eavesoonasexper t
sf oll
owingt heorganizat
ionsaid
despit
eev er
ythingtheyhaven'tgotful
llucidi
tyonRs2, 242cr orecr edi
tsprogressedto
workersandot hers,andtheadvantageoft hepl
anwi t
ht headv ert
iserpossessedAdi t
ya
Medisales.

Speculat
ors ar
el i
kewise wor
ried abouta pot
ent
ialexaminat
ion by t
he f
inancial
exchangecontr
oll
ertheSecuri
ti
esandExchangeBoardofIndi
a(SEBI)onagrumbling
byani
nfor
mant
.Theor
gani
zat
ionsai
dithasn'
tgot
tenanycor
respondencef
rom SEBI
.

SunPhar mahasbeenat temptingtor eest

ablishfi
nancialspecial
istcertainty,af
tera
bli
steringnot ebyAust ral
ianbusinessf i
rm Macquarieandani nformantgr i
evanceto
SEBIaweekago.Themedi cat
ioncreator'
sst ockhassincedr oppedt oone- fi
fthofit
s
value.Theor ganizationhel
daf i
nancialspeciali
stapproachMondayl at
eni ghttomol l
if
y
wor r
iesov erlater eport
sofadmi nist
rat
ionslipsattheorganizati
on.Dili
pShanghv i
,Sun
Pharma' sManagi ngDi r
ectorendeavoredt ogiv eapoint-
by-
pointcount erandsai dhis
organizati
oni spr eparedtorear
rangestructuresandgetridofspecificexchanges.
However
,inv
est
igat
orshav
edi
scov
eredsomet
hingoutofor
deronnol
esst
hant
wo
t
hings
Outsidercr edi
tsandadv ancesInFY18,cr editsgiv enbySunPhar mar osetoRs2, 242
crore,contrast
edwi thRs69. 8croreay earpr i
ortowor kersandot hers.Theor ganizati
on
saidthiswasanor ganizedexchange,i dentif
iedwi tht hephar maceut i
calbusiness.Be
thatasi tmay ,itdidn'
tshar ecrit
icalsubt l
etiesl i
ket heinev i
tabl
er ecipi
entoft he
advance,r efer
ingt obusinessaffectabilit
y.Howev er,theor ganizati
onsai dthecreditis
forphar mabusi nessandcant ake2- 2.5y earstor eturn,withloancostgoi ngfrom 0t o
15per cent,contingentuponspeci f
icr esults.Theor gani zat
ionincludedi tcanloosenup
thi
sexchangesoonert hanarrangedwhenev errequired.
Inanycase,i tbr oughtup mor ei ssues."
Givent heongoing $200 mi l
li
onmodaf i
nil
sett
lementand$250mi l
li
onf orteitem relat
edachi evementsi
n1HFY19,SunPhar ma
wascompel l
edt oappr oachTar of or$500mi ll
ionuncommonpr of
itstof ort
if
yi t
sex-
Taro monet ar
yr ecord.Thi sf urt
herdebi l
it
ates the basi
sf orf acil
it
ating such a
substanti
alcreditt oanout sider.Addi t
ional
ly,doesi tdemonstr
atet hatSunPhar ma
neveragainhasv ent
urer oadst opr ocure15per centIRRonphar ma/ cl
aimt of ame
ventures?
,"KotakSecur i
ti
essai dinar eport.

Modaf i
nilant
itr
ustsettl
ementidenti
fi
eswi thpur
port
ed" pay-
for-
delay
"settl
ement sin
which brand-name medi cat
e producer
s pay thei
rconv enti
onalpar t
nerst o keep
tr
anquil
izes offthe mar ket
.The exami ner
s wereli
kewise scared by absence of
di
vulgencesar ound t
hequant i
tyofgat heri
ngsaccept
ing thecredit
,ort henor mal
quantum ofadvancesgiven.
Related gatheri
ng exchanges Sun Pharma'sl ocaldet
ail
i
ng business i
s alt
ogether
di
r ect
edt hroughanadv er
ti
serpossessedsubstancecall
edAdi t
yaMedisal
es,anov er
ly
stockiestthatturnedintoar el
atedgatheri
ngoft heor
ganizat
ionamidFY18af tera
combi nati
onofaf ewotherventur
eorganizat
ions.
Adit
yaMedisal
eshat
esanynot
eworthyproducti
vi
ty,andonincomesofRs8,000crore,
i
thadanEBITDAedgeof1.
7percentandnetedgeof0. 4per
centi
nFY18.Shanghv
i sai
d
thecour
seofacti
onwasmadeforaneffect
ivedutystr
uctur
eandsaidhei
spreparedto
rel
ookatthear
rangementandmi
ghtt
akeaganderatchangi
ngt
hest
ruct
ureoft
he
arr
angement
.
TheAdi t
yaMedisal
escourseofactionfordutyproduct
ivi
tyhastur
nedoutt
o be
unessent
ial
wit
hthepresent
ati
onofGoodsandSer
vicesTax(GST)ay
earago.
Whatareexpertssayi
ng" Theor gani
zationgav econstrai
nedlucidi
tyont hestructureof
i
tshouseholdC&Fspeci alist(Adit
yaMedi sales),US$340m ofsteadycreditsprogressed
t
owor kers/
othersandt hei nformantobj ecti
onr ecor
dedagainstt heor ganizati
on.In
vi
ewofspecul at
orinput,t heexecutivesmayt akeaganderatr ewinding/redesigni
nga
f
ew exchangest hattheor ganizati
onaccept swon'thaveanymat er
ialeffectoni ts
t
asks,
"saidII
FLinitsrepor t.
"Wetrusttheseissuesmayr emai
nashadeont
hev
aluat
ionsunt
ilgr
eat
erl
uci
dit
y
dev
elops,
"ICICISecur
it
iessai
d.