Forensics and the art of triangulation

(VijayShetty) #244

Can someone explain in detail what’s happening with Sun Pharma - the multiple whistleblowers and all? Have they fudged their books or is it something else?

(Krishnaraj) #245

The core issue is the use of related party transactions for various personal reasons. The total transactions are about 8,000 cr with one of the related parties. Besides that this party is related was disclosed only in AR 2018.

When pressed for more details in the conference calls, Mr Sunil Shanghvi was evasive in the early Dec conference call. Just to highlight an instance of “deprival super reaction syndrome” one of the analyst asked Mr Shanghvi to file a defamation suit against Moneylife.

These transactions were exposed by a whistleblower who has given a 150 page and a 172 page document to SEBI, and shared it with Moneylife. Moneylife read through it and reported the summary.

Sun Pharma was caught unawares the second time around when the 172 page document was published.

The recent precipitous fall is on account of Moneylife articles:

The are however available only for paying members.

I hope this helps.

(VijayShetty) #246

What was the reason for hiding that it was a related party transaction? Did their balance sheet or P&L or cash flow look better because of it - I mean were they parking stock with the related party or to inflate figures or something like that?

(Krishnaraj) #247

According to Mr Shanghvi, there was no hiding, some events transpired in 2017 that made this entity to be disclosed as a related party.

The entity AML is the sole distributor according to the whistleblower with turnover of ₹8,000 crore in FY 18.

Just increasing the commission by 50bps provides a increased flow to promoters of ₹40 crore per year from Sun shareholders.

(guest_eps) #248

On Fri there was 2.39 cr shares taken delivery, it didnt totally go for LC, seems there was block deal at 370 for 8 Cr at market open.
almost every long term portfolio’s have Sun Pharma as top pick, now with such owning of stock , i cant think should be affected by some 8k cr, very old past transactions for a market cap of 93k cr company.

(dprashant) #249

There are two ways to look at it
Breach of trust , error of judgement in accessing promotors
Impact on P&L in absolute terms.

Depending on who looks at what makes all the difference.

Just sharing a perspective…

Disc - not Invested

(kums17) #250

Small investors will have to decide whether its worth add/hold at this stage or exit out of the stock in view of the corporate governance. I am confident whatever happens, financial integrity in our Country will get enhanced due to such actions by the whistle blowers and money life. I am as of now in Hold mode just for the reason to see more clarity. Time will tell us Who is right??

(kums17) #251

(Marathondreams) #252

(Krishnaraj) #253

Moneylife has said that the contents are open to viewing by Institutional investors.

The article you shared also discloses with blinding clarity the sorry state of investigative journalism of the print media.

Sun Pharma is a Nifty stock, which means that every Nifty ETF holds it, institutional investors hold close to one third of the company (SHP - Dec 2018), LIC holds close to 6%. So obviously they should be very very concerned.

But the paper which has access to every business house, fund house, public institutions and holds gala business events, and thus will have some sources in each of these places, cannot produce any statement from any of them.

Instead they get it from two firms, which I bet is mostly unheard by most members of even this forum, called Target Investing and Systematix Shares.

On the other hand a small magazine with limited resources risks sharing the report whatever the consequences. They had exposed NSE in the recent past which slapped a Rs 50 cr defamation suit that was thrown out with penalty.

Kudos to them and their grit! Sucheta Dalal’s courage from the days she exposed the Harshad Mehta scam is to be really admired.

(Gaurav Agarwal) #254

I could not possibly understand their logic/thinking behind sharing the report to only select investors. I have no doubt in mind that their actions have distorted the market.

Why retail investors do not have access to the report? Institutional investors should read the report and make-up their mind whereas retails investors should walk in blind.

I do not for second call this good journalist. I think they have shaken the very foundation of market by creating information imbalance and should atleast be reprimanded for that.

They should have published the complain/report on internet for all to see and take a call.

(Krishnaraj) #255

More retail investors own the stock via institutional investors, than retail investors who hold it directly. But far more resources and headache to manage everyone who claims to be a retail investor, if you make it open for everyone.

If you are keen to inspect, then just call them up and explain yourself. Chances are if they see you as a bonafide retailinvestor, they will allow you in.

(esoteric) #256

Sucheta has been claiming that corporates discriminate by holding concalls/presentations to large /institutional investors and ignore the retail investors/reporters like her.
Now she is doing the same.
When pressure has to be imposed on fund managers/fund houses for wrong doing the retail investor is targeted/implored, otherwise they are ignored by all.

The big question that begets an answer is what if this whistle blower revelation is false and the company files for defamation against Moneylife?The magazine will certainly be hauled up.Dangerous precedent.

(Krishnaraj) #257

You have a point when seen from the view of a retail investor.

I was probably empathetic to them knowing their resources and the opponents they take on. Maybe I am biased because I am a Moneylife subscriber and a microscopic donor to their foundation, and afraid that harm may befall them (and hence to me because all this will stop). As such they have suffered from the NSE defamation case. When they do suffer, no offence to anyone, no retail investor will be around to help their case. So it may not be 100% morally correct, but on a net basis - trading morality vs practicality, I am OK.

But I agree some may get really cheesed off, and for that I am sure if you call them up and really keen they can open up.

(Abhishek Basumallick) #258

On this case, I will fully supportive of Moneylife. In India, as in practically every other part of the world, taking up issue against a formidable corporate entity is something that very very few are willing to do. Moneylife has an excellent track record of shedding light on wrong and corrupt practices of corporate India.

On whether they could have given access to all instead of only institutional investors, it may be a matter of just managing the crowd. You cannot suddenly have 100s and 1000s of people descending on your office, specially when you cannot be sure who they are and what their motives are. However, one wonders what prevented them from just uploading scanned copies of the documents on their website to make the documents public. But let’s also understand that they are a journalistic house and not a NGO fighting against corporate governance, so they may be keeping it for a future magazine story.

(Bhaskar Jain) #259

Just sharing, since have come across this many times in Twitter from different persons. Don’t know the authenticity of the same but food for thought…

(BB01) #260

Not dismissing these allegations but the core of the issue is not the alleged intent of Moneylife.

The core of the issue is corporate governance breaches in significant size by Sun Pharma. Let’s not shoot the messenger, flawed as they maybe, and distract from the message. It’s all too common to obscure the truth by throwing enough mud around that nobody believes anything.

(Ranga Kiran) #261

(Marathondreams) #262

Sun pharma is slow to respond to investor concerns but let’s hope they will understand that loss for the promoters due to of stock price crash will be much bigger and permanent than the money they may be making on the sidelines ( as alleged ) due to related party transactions.

I would like SEBI to act decisively in these matters so that it acts as a big deterrent for all potential or future wrong doers who are always interested in pushing the boundaries bit too much…

(Shivram) #263

At the outset, I agree with most views that the intentions of Moneylife are irrelevant when discussing corporate governance issues in Sun Pharma.

But that said, I remain a subscriber of Moneylife and have high regards for Mr. Debasis and Ms. Sucheta. You only have to read their magazine to understand the kind of work they are doing to improve financial literacy in India. But then this makes me biased too.

The tweet above gives a screenshot of a 2013 balance sheet with 88 lakhs advance received rounded. Then it gives another screenshot of a purported mail from Ms. Sucheta to ceo Jignesh raising some questions. Even if these documents are considered real, how do these indicate that Moneylife took money for not reporting a financial irregularity? This looks like some random tweet to deviate from the issue in hand.