SEBI orders forensic audit against Sun Pharma based on whistle-blower complaint: Sources


The Securities and Exchange Board of India (SEBI) has ordered a forensic audit against India’s largest drugmaker Sun Pharma to look into allegations of financial irregularities and lapses in corporate governance standards, two sources have told Moneycontrol.

“SEBI has ordered a forensic audit to confirm the findings of its initial inquiry,” a senior SEBI official told Moneycontrol on condition of anonymity.

The development was confirmed by another person privy to the proceedings.

SEBI has been poring over Sun Pharma’s books of accounts to look into red flags raised by the whistle-blower in his complaint.

No clean chit yet

Earlier, a Business Standard report said the SEBI inquiry had cleared Sun Pharma of any wrongdoing, after finding no merit in the whistleblower’s allegations.

But a retired SEBI official told Moneycontrol that the agency does not give clean chit based on preliminary inquiry.

“In such (big) cases, SEBI will always prefer to go with a forensic audit,” he added.

Over the past few years, India Inc has witnessed a string of cases, such as ICICI Bank-Videocon, NSE algo trading and MCX, which came to light following allegations made by whistleblowers. SEBI ordered a forensic audit in all cases.

However, phone calls and emails to a Sun Pharma spokespersons remained unanswered, at the time of publishing the story.

The complaint

In February this year, Sun Pharma told stock exchanges that it had received two queries from SEBI related to a 2004 foreign currency convertible bonds (FCCB) issuance and about Sun’s business with Aditya Medisales (AML), and it had responded to both of them.

Media reports then said that SEBI’s queries were a result of the anonymous whistleblower complaint, which had questioned transactions amounting to over Rs 5,800 crore between AML and Suraksha Realty from money generated by the publicly-listed company.

Moneycontrol has not independently verified claims reportedly made in the whistleblower’s complaint.

Among other allegations, the whistleblower in the complaint said that AML carried transactions over Rs 5,800 crore with Suraksha Realty, controlled by Sun Pharma’s co-promoter, Sudhir Valia.

This was even as AML almost entirely owned distribution for Sun Pharma’s domestic formulation business.

In another complaint last year, the whistleblower is said to have alleged irregularities involved two or three major rounds of foreign currency convertible bonds (FCCBs) issues by Sun Pharma during 2002-2007, which was managed by Jermyn Capital LLC.

Jermyn Capital was said to have links with stock market manipulators Ketan Parekh and Dharmesh Doshi.

With inputs from Moneycontrol’s Viswanath Pilla.
News Source: moneycontrol

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