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BSE hands over Sun Pharma Dec trade details to Mumbai Police

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MUMBAI: The Bombay Stock Exchange (BSE) has given Mumbai police the derivative trading details on Sun Pharma for the December contract, with law enforcement seeking to ascertain whether some traders had conspired with an equity research team to hammer the stock of India’s biggest drug-maker. The BSE response comes after the police’s Economic Offences Wing (EOW), taking forward a complaint by Sudhir Valia Associates, had begun a preliminary enquiry (PE) against Macquarie Group, which circulated an investment note that raised alleged corporate governance concerns at Sun Pharma.

The National Stock Exchange, the competing bourse also based in Mumbai, is yet to provide the police Sun Pharma’s trading details on its platform. ET was the first to have reported on the Macquarie note in its edition dated November 29, 2018, explaining the fall in the stock that had declined then to a six-month low. Valia, linked to the Sun Pharma promoter family, had complained that “a note prepared and circulated by Macquarie Group pulled down the share price from Rs 510 to Rs 410 eroding market capitalisation by Rs 20,000 crore in December.” Valia alleged that “the note, titled ‘The murky waters of Sun Pharma Co’, …..

(was) issued to investors to unduly benefit select clients by maliciously defaming Sun… Incidentally, this note was leaked at the same time as the month-end settlement cycle… drew near.

This gave a massive advantage to short sellers.

Apparently, people involved in drafting and circulating the note were successful in their objective to substantially pull down (the) share price,” said the complaint, which was seen by ET. The Macquarie note had raised questions about alleged inadequate disclosures regarding the role of promoter Dilip Shanghvi’s brother-in-law Sudhir Valia, Sun’s past links with banned traders Ketan Parekh and Dharmesh Doshi, and related party transactions. The police probe is focused on whether investment firms or traders colluded with the Australian multinational independent investment bank that had written the research note.

Sleuths have also written to market regulator SEBI, seeking details whether the note, the fall in share prices and potential beneficiaries are linked.

SEBI’s reply is awaited. “We are probing whether the note was factually correct on all counts, how it got leaked on social media and then made it to the mainstream media,” a Mumbai police official told ET.

“The other important point is to probe if there was any collusion… with the intention to manipulate share prices by circulating the note.

There was a remarkable drop in the shares after this note went viral, and this is going to be our focal point.” An email sent to Macquarie didn’t elicit a response. To be sure, only a preliminary enquiry is underway so far.

The police would convert this into a first information report (FIR) if the initial probe unearths a conspiracy that requires criminal investigation.

“The PE is probing if there was any cheating, conspiracy, misrepresentation and fraud committed by the firm named by the complainant,” said another official aware of the line of investigation. Valia has highlighted two instances of factual inaccuracy in the Macquarie note.

One pertains to alleged conflict of interest involving Valia and his audit or oversight roles, suggesting corporate governance lapses at Sun Pharma, the complaint said. The second refers to SEBI restrictions later set aside by the tribunal, something that didn’t find mention in the Macquarie note.

“ Andrew (the author), however, circulated only partial information relating merely to SEBI’s order and did not mention anything about the SEBI Appellate Tribunal (SAT) relief.

This was done to create in the minds of investors (an impression) that I have a fraudulent intent…This article seemed to be published with the intent to pull down the share price of Sun Pharma.

It was planned in a manner to… provide cover to the short sellers,” the complaint said. The police recorded the statement of the author, who has defended the note, claiming it was based on open source information. “He claims that the entire note is based on open source information, which we are probing.

On the allegation by the complainant on Andrew’s failure to mention the tribunal order that set aside the SEBI ban, the author said that he had provided the link to the SAT order.

But he was not able to give a satisfactory explanation for his failure to mention in his note the tribunal order,” a police official cited above said.




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