What went wrong with Sun Pharma shares? Shocks investors, plunges 11% as Dilip Shanghvi under scanner; should you invest?

While Indian markets are soaring to an extreme level today, there was no love for the pharma-major Sun Pharmaceuticals Industries. There was massive bloodbath in the company and the shares crashed by 11.39% in an early trade today with an intraday low of Rs 441.95. Currently, the stock is trading at Rs 458.00 per piece lower by 34.30 or 6.97% at around 1049 hours.

Such decline in shares comes despite the company announcing that Sun Pharma has received final approval from US FDA for its Abbreviated New Drug Application (ANDA) for generic version of Ganirelix Acetate Injection, 250 mcg/0.5 mL. The generic version is therapeutic equivalent to Organon’s Ganirelix Acetate Injection, 250 mcg/0.5 mL. 

But no, this is not the reason for the drop in Sun Pharma shares.

The reason behind the Sun Pharma share price plunge may well be the market watchdog. Yes, it can be blamed on market regulator Sebi, which is planning to re-open an old investigation in the company, after a 150-page letter was sent by a whistleblower. 

According to a PTI report,  sources stated that, SEBI plans to reopen the investigation into the insider trading case against the company and its promoters that was settled through the consent mechanism.

Reportedly, Macquarie in its note raised several questions about corporate governance practices by the company. The note points to alleged connections with tainted entities like Ketan Parekh and Dharmesh Doshi, and the conflict of interest with regards to Sudhir Valia, a whole-time director of Sun Pharma who is also the brother-in-law of promoter Dilip Shanghvi.

Further, the note talks about real estate guarantees given to Suraksha Realty, apart from seeking clarification as to why a little known London-based firm Jermyn Capital was selected to manage Sun Pharma's $275 million foreign convertible bond issue back in 2004-07. Jermyn's Indian arm has links with Parekh and Doshi, who are the two traders who have come under scrutiny for the market crash of 2002.

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#ZBizHeadlines | ट्रेड वॉर की टेंशन घटने से मेटल शेयरों की चमक बढ़ी...टाटा स्टील, हिंडाल्को और वेंदाता में 4% तक की तेजी। देखिए बाजार से जुड़ी बड़ी खबरें। pic.twitter.com/Ldhij9uUlm

— Zee Business (@ZeeBusiness) December 3, 2018

Hence, today Sun Pharma has made its investor quite poor, on the back of panic selling. So should you invest going ahead? 

UBS in a Bloomberg Quint report said,  "Whistle-blower allegations are valuation dampener at the minimum. Negatively impacts Management bandwidth at a time when key brands are getting launched. Expect stock to react negatively to the whistle-blower allegations."

However, as far as investors are concerned, UBS has Maintained ‘Buy’ with a price target of Rs 690 on the company. That should answer their most important question.