Reality check: Sun Pharma: Losing potency

The stock of Sun Pharma fell more than 16 per cent last week following allegations by a brokerage firm and a whistle-blower complaint to SEBI. Reports that SEBI may reopen the investigation into the insider trading case against the company and its promoters — settled through the consent mechanism last year — spooked investors. In a conference call to clarify matters, the management addressed the allegations, including on insider trading in the Ranbaxy deal, related party transactions and a spike in loans and advances in FY18.

The stock price has corrected 16 per cent and the stock trades at a discount to peers such as Dr Reddy’s, Lupin and Cipla. Sun Pharma’s earnings have been on a revival path and the outlook is robust, especially on the speciality business. The company also appears to have overcome regulatory hurdles, especially in the US.

But much would depend on how SEBI acts on the allegations. This would be a major hurdle for the stock .

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