Sun Pharmaceutical Industries Limited: Disclosure Practices

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Sun Pharmaceutical Industries Limited: Disclosure Practices

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Publication Date:
December 14, 2020

Source:
Indian Institute of Management-Bangalore

Industry:
Pharmaceutical industry

In December 2018, Dilip Shanghvi, the CEO and majority shareholder of Sun Pharma, scheduled an urgent investor call to address the questions raised about the level of corporate governance at Sun Pharma. A whistleblower complaint and an analyst report was being circulated in the market that highlighted concerns about the undisclosed related party transactions with promoter owned companies, unexplained loans with third parties, and subsidiaries being audited by firms related to a promoter, among other similar concerns. The stock markets responded negatively to the clarifications provided by Dilip Shanghvi, forcing Sun Pharma to reverse some of the transactions undertaken and constitute a corporate governance and ethics committee to restore investor confidence. The case provides extensive detail about the two primary governance issues raised viz., an insufficiently disclosed loan transaction with an unnamed third party and a related party transaction with a promoter owned entity, and tracks a few interesting reactions from market participants about the expectations of good governance from an industry leader. To provide a background to this discussion, the case also tracks the development of Sun Pharma from its inception in the 1980s to becoming the fifth largest generic pharmaceutical company in the world.

Copyright © 2021 Harvard Business School Publishing. All rights reserved. Harvard Business Publishing is an affiliate of Harvard Business School.

Sun Pharmaceutical Industries Limited: Disclosure Practices

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