Sun Pharma, Ranbaxy shares decline after court stalls merger

Purchase of Ranbaxy shares by Silverstreet Developers, a Sun Pharma subsidiary, comes under scrutiny 

The Andhra Pradesh high court on Tuesday asked the stock exchanges and Sebi not to approve the merger deal between Sun Pharma and Ranbaxy, untill allegations of insider trading involving Sun Pharma’s promoters are investigated. Photo: Hemant Mishra/Mint

Mumbai: Shares of Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd fell after the Andhra Pradesh high court on Tuesday temporarily halted the proposed merger between the two companies until allegations of insider trading involving Sun Pharma’s promoters are investigated.

The high court, acting on a writ petition filed by some investors, asked the stock exchanges and capital markets regulator Securities and Exchange Board of India (Sebi) not to approve the merger deal announced in April.

Shares of Sun Pharma fell 1.22% to Rs.631.55 on BSE, while India’s benchmark Sensex dropped 0.22% to 22,417.80 points. Shares of Ranbaxy declined 2.3% to Rs.472.10 on Wednesday.

Silverstreet Developers Llp, a Sun Pharma subsidiary, purchased a large volume of Ranbaxy shares just a few days before Sun Pharma and Ranbaxy announced an all-stock merger deal valued at $3.2 billion.

There is a possibility that executives at Silverstreet had access to information about the transaction that were not disclosed publicly, said Anoop Narayanan, a Mumbai-based corporate lawyer and founder of ANA Law Group.

“Prima facie, it appears from the reports that the people on board at Silverstreet are apparently closely related to Sun Pharma’s top management and people in such roles are likely to be involved in the decision making of Sun Pharma,” said Narayanan. “Thus, there is a possibility that Silverstreet may have been in possession of the unpublished price-sensitive information prior to its announcement. If these are proved, the facts of this case will satisfy the two key aspects that triggers action under Sebi regulations on insider trading 

MUNTAZIR ALAM 

PGDM 2ND SEM

IIMT COLLEGE OF MANAGEMENT