Today morning, Sun Pharma continued to fall as the corporate governance issues blown up by a whistle blower remains a big concern. The stock price fell over 12% to the day’s low point till now at Rs.375.40, hitting a new 52-week low.

Despite the clarifications issued by the company on 3rd Jan, Bloombergquint did a very detailed research into this nexus between a key distributor, Aditya Medisales and the relationship with the promoter, Dilip Sanghvi. Though the company said that the relationship existed, it has acknowledged it only from FY18 while the report clearly finds the relationship going back to 2006 where indirectly, Dilip Sanghvi has owned the company.

Through a very complex web of shareholding, the nexus was not so obvious but digging deep, it is apparent that the shareholders are family members and promoters of Sun Pharma. It is very common for companies to promote their own supplier so that they get dual benefit; that is not illegal. But SEBI has stipulated that such nexus should be disclosed; that transparency is missing and raises hackles over corporate governance.

In its clarification, the company stated, “The transactions with AML are reported as related party transactions in FY18 but not in previous years since AML was not required to be classified as a related party prior to FY18. AML became a related party in FY18 due to consolidation of its shareholding amongst fewer entities as compared to the past. We had also taken shareholder approval on this in our 2017 AGM. These transactions cover the sales made to AML in FY18 and consequent receivables. Sun Pharma’s relationship with AML is on an arms-length basis.”

“Arms-length basis” relationship? That makes no sense as 59.27% stake is owned by Sanghvi.

And this is no small fry business too as Aditya Medisales posted a revenue of Rs.8005 crore for FY18, distributing Sun drugs in India.