Sun Pharma auditor files case against Macquarie with Economic Offences Wing: Sources


The Mumbai Police’s Economic Offences Wing (EOW) has initiated an inquiry against Macquarie broking house on the basis of complaint registered by Sun Pharmaceutical Industries’ auditor Valia & Timbadia.

Valia & Timbadia were auditors to some of Sun Pharma’s subsidiaries.
A source in the department told Moneycontrol: “The auditor has registered a complaint stating that the broking house prepared false sale notes and circulated it to their clients, which impacted the stock price negatively.”

Elaborating on the same, the source stated: “The auditor moved EOW alleging Macquarie mischievously intended to profit by issuing a sales note against Sun Pharma. Post this note and whistleblower letter, the company’s investors incurred heavy losses and the promoters’ net worth too took a hit. The complainant has pegged the loss at Rs 100 per share, but failed to mention the exact quantum of loss.”

However, Sun Pharma’s spokesperson said they are unaware of any such complaint and that they haven’t filed a case against Macquarie with the EOW.

Confirming receipt of the complaint two weeks back, another EOW source said, “The department is exploring whether this complaint comes under its jurisdiction. We will seek details from the Securities and Exchange Board of India (SEBI) as well as trade data from exchanges.”

Valia & Timbadia couldn’t be reachable for a comment. Macquarie too refused to comment to a query from Moneycontrol.

Macquarie, an Australian multinational independent investment bank and financial services company, questioned corporate governance practices at Sun Pharma, causing the drugmaker’s shares to end at a six-month low on November 29, 2018.

The report, written by a trader, raised concerns over inadequate disclosures about the company’s links with banned traders Ketan Parekh and Dharmesh Doshi, related transactions, and role of promoter Dilip Shanghvi’s brother-in-law Sudhir Valia, who is a Director in Sun Pharma. It also raised questions about real estate guarantees provided to Suraksha Reality.

The report also alleged about Hiten Chandulal Timbadia, a partner of auditing firm Valia & Timbadia, involvement in a stock rigging case.
The brokerage firm sought clarification on why little-known London-based firm Jermyn Capital was selected to manage Sun Pharma’s $275 million foreign convertible bond issue back in 2004-07. The note was shared through WhatsApp on November 27, following which the stock fell three percent on November 28, 2018.

The note enquired about the role of Lakshadeep Investments, a firm where Valia is a shareholder. The auditor of Lakshadeep is Valia’s CA firm, Sudhir Valia & Associates, which Macquarie deems a huge conflict of interest.

The brokerage firm has raised many red flags on the pharmaceutical company over the years. “Most of these the street has already picked up on, including a sole distributor for Sun Pharma that is wholly-owned by the promoter, its conspicuously low tax rate, and guarantees made by the company to a number of entities,” the note read.

Regarding Jermyn Capital, the note said its Indian arm was found to have links with Parekh and Doshi, traders guilty of rigging share prices and causing a market crash in 2002.

Valia’s Investment Trust of India, previously named Fortune Financial, lists Orange Mauritius as a shareholder. The latter is an FII sub-account of First International Group, which allegedly links to Doshi and Jermyn Capital.
Sun Pharma has denied the allegations and said it has never done anything against the interests of minority shareholders.

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