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Sun Pharma replaces domestic formulations distributor with its own subsidiary

Press Trust of India

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New Delhi: Sun Pharma on Tuesday replaced its domestic formulations distributor Aditya Medisales with its own subsidiary in the backdrop of a second whistleblower complaint filed against the company.

The company also announced unwinding of a transaction amounting to Rs 2,238 crore with Atlas Global Trading and initiated steps to induct S R B C & Co LLP, its statutory auditors, as auditors of subsidiaries.

Last week, Sun Pharmaceutical asked markets regulator Sebi to look into the issues of certain entities and individuals allegedly adopting unfair trade practices prejudicial to the company’s shareholders.

 

Amid reports that a second whistleblower complaint has been filed against it and shares taking a beating on the exchanges, Sun Pharma had written to Sebi flagging concerns that certain entities were allegedly adopting unfair trade practices.

 

“Sun Pharma’s distribution related to India domestic formulations business shall be transitioned from Aditya Medisales Ltd., the current distributor, to a wholly-owned subsidiary of Sun Pharma,” the company said in a BSE filing.

Sun Pharma said this change will be made effective by first quarter of 2019-20, post receipt of all requisite regulatory approvals.

Regarding unwinding of the transaction with Atlas Global Trading, Sun Pharma said, as of March 31, 2018, the company’s consolidated balance sheet, reflected a liability towards obligation of supplies to Atlas Global Trading amounting to Rs 2,238 crore.

“This liability was in respect of Atlas assuming the damages on account of Protonix patent litigation settlement entered by Sun Pharma which was disclosed in Sun Pharma’s annual report 2013-14,” the company said.

In September 2014, Sun Pharma’s Halol facility (Gujarat) was impacted by USFDA cGMP issues which were finally resolved in June 2018, after nearly four years. These cGMP non-compliances resulted in supply constraints thereby, Sun Pharma was not able to adhere to the agreed supply schedule with Atlas.

Sun Pharma, in 2017-18, had funded Atlas towards non-fulfilment of its supply obligations till the time such obligations are fulfilled as per the agreement.

“The said funding was included in loans and advances schedule of Sun Pharma’s 2017-18 consolidated balance sheet,” it added.

Sun Pharma said the parties to the supply contract have now agreed “in principle, that Atlas will assign its rights and obligations arising from this contract to a wholly-owned subsidiary of Sun Pharma”.

“This assignment will ensure that the loans and advances given to Atlas will be settled. On conclusion of this transaction, in the consolidated balance sheet, this loan and the obligation will cease to exist as it gets squared up. This transaction is expected to be concluded in 2018-19,” the company added.

Sun Pharma said it has also initiated steps to induct S R B C & Co LLP, its statutory auditors, as auditors of subsidiaries that are currently audited by Valia & Timbadia.

Regarding loans or guarantees to Suraksha Realty, Sun Pharma said, “neither any loans nor guarantees have been given to Suraksha Realty. Sun Pharma would like to dispel all falsehoods being spread about its financial dealings with Suraksha Realty. The company states unequivocally that it does not have any financial transactions with Suraksha Realty”.

Last week in a letter to Sebi Chairman Ajay Tyagi, the Mumbai-based drug maker had said it has come to know from a media report that a second whistleblower complaint has been filed against the company.

 

“We are concerned that certain entities/individuals are adopting unfair trade practices prejudicial to the interest of shareholders and other stakeholders,” the company had said in the letter, a copy of which has been submitted to the stock exchanges.

In November 2018, a whistleblower approached Sebi with a document alleging various irregularities by the company, its promoter and others.

Shares of Sun Pharma were trading 5.17 per cent higher at Rs 418.95 apiece on BSE.


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RBI Governor Das, bankers may not be on same page over passing rate cuts

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Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das will meet bank chiefs to impress upon the need to improve transmission within the confines of it being a business decision. However, certain indicators suggest that bankers won’t be wrong in disagreeing with Das on the all-important rates issue.

So far, only State Bank of India (SBI) has reduced its home loan rates (up to Rs 30 lakh) by only five basis points (bps) after the policy rate cut of 25 bps on February 7.

High credit deposit (CD) ratio, with incremental ratio over 100 (indicating credit disbursement is more than deposit mobilisation) leaves banks with no room to cut deposit rate. They cannot cut lending rates without cutting deposit rates. Even when deposit rates are pared, because of their fixed nature, the cost of deposit doesn’t come down readily. Contrary to that, the lending rate cut immediately translates into hit on profitability.

 

Pallab Mahapatra, managing director and chief executive officer of Central Bank of India, said his bank’s marginal cost-based lending rate (MCLR) for one year and deposit rates are already lower than many large banks. For reducing loan rates further, the bank will have to cut deposit rates further, which would make the bank vulnerable to poaching for deposits from competing banks. And this, therefore, makes transmission a challenge.

One reason why the banking system is also increasingly getting vulnerable to rates is because the low cost current and savings account deposits (CASA) are running down as a share, whereas costly bulk deposits are increasing because of liquidity tightness in the banking system.

The system liquidity was running a deficit of more than Rs 1 trillion as on Tuesday, having improved from Rs 1.13 trillion on February 18. This is despite RBI’s bond purchases from the secondary market reaching about Rs 2.7 trillion. The liquidity deficit will only increase with tax-related outflow from companies in the coming days. “Liquidity is leaking from other channels also, for example, high currency in circulation (CIC) in an election year,” said a senior economist.

Latest data shows currency in circulation, as on February 15, was at Rs 21.06 trillion, compared with pre-demonetisation level of Rs 17.97 trillion. The growth in CIC on a year-on year basis was 18.4 per cent, much higher than the normal 13-14 per cent even in busy periods.

Clearly, the RBI’s record open market operations (OMO) was not enough when supply of bonds remained elevated, and while not much of dollars are flowing into the country.

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Growths set to slow down to 6-6.5% in H1 of 19: Nomura

Agencies

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Mumbai: Despite the almost lose fiscal and monetary policies, the economy is likely to slow down to 6-6.5 percent in the first half of 2019, due to weak global demand, political uncertainty and tighter financial conditions, says brokerage report.

The Reserve Bank under the new governor had last week projected a GDP growth of 7.4 percent for 2019-20–7.2-7.4 percent in first half, and 7.5 percent in the second half.

“Consistent with our index, we expect GDP growth to slow from 7.1 percent year-on-year in the third quarter of 2018 to 6.6 percent in the fourth quarter and further to 6-6.5 percent in the first half of 2019,” Japanese brokerage Nomura said in a report Tuesday.

 

Citing the fall in the Nomura composite leading index fell to 99.9 in Q1 of 2019 from 100.1 in Q4 of 2018, indicating the business cycle is headed lower, at least into the first half of 2019, the report said.

“Fiscal and monetary policies are turning expansionary but are unlikely to change the near-term trajectory,” the report added.

The monetary and fiscal policies have shifted to easing mode, although it remains cautious on their near-term impact, it said.

“On fiscal policy, while we compute the fiscal impulse of the budget at 0.36 percent of GDP, we foresee implementation challenges ahead of the government’s ‘farm charm’ package,” it said.

On monetary policy, the RBI reaffirmed its focus towards headline inflation and its willingness to support growth, which suggests the February policy cut was not a ‘one and done’, it said.

“With its inflation projection remaining below the 4 percent target through 2019, and our assessment that growth will disappoint the RBI, we expect another rate cut in Q2 (very likely in the April review),” it said.

As the previous divergence between exceptionally low food and elevated core inflation closes, the report does not assess the need for a deeper rate cut cycle. It sees a 20 percent probability to a third rate cut in the third quarter.

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Indian economy fundamentals sound, set to reach USD 5 trillion: PM Modi

Agencies

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Seoul: Prime Minister Narendra Modi on Thursday said fundamentals of the Indian economy are sound and it is on the way to becoming a USD 5 trillion economy soon.

Addressing the India Korea Business Symposium here, he said India is now a more open economy and has attracted USD 250 billion foreign direct investment (FDI) in the last four years. He said no other large economy in the world has grown at 7 per cent year after year.

India, he said, has jumped to 77th spot on the World Bank’s ease of doing business ranking on the back of reforms and is determined to break into the top 50 next year.

 

The role of the government is to provide a support system, Modi said, adding that India has emerged as a land of opportunities.

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