Market regulator Sebi has received multiple complaints about alleged irregularities in trading of Ranbaxy shares before the announcement of its multi-billion dollar merger deal with Sun Pharmaceutical.
Securities and Exchange Board of India has started collating data related to the matter from stock exchanges and clearing corporations, sources said. In one of the biggest deals in the domestic pharma sector, Sun Pharmaceutical Industries announced on Monday that it would acquire troubled rival Ranbaxy laboratories in a $4-billion deal that includes $800 million debt.
Shares of Ranbaxy had witnessed substantial movements on the exchanges last week itself. From March 31 to April 4, shares of Ranbaxy jumped 26 per cent. The scrip on Wednesday closed at Rs 467 on the BSE.
The sources said Sebi has received multiple complaints regarding suspected irregularities in the trading of Ranbaxy shares in the run up to the deal announcement. During that period, there have been heavy intra-day surges in volumes as well as prices of Ranbaxy shares.
Complaints have been received from various quarters including brokers, investor associations, proxy advisory firms, fund houses, Foreign Institutional Investors and Association of National Exchanges Members of India, the sources said. The capital market watchdog has started collating data related to movement in Ranbaxy shares including from stock exchanges and clearing corporations, sources said.
Sebi is also gleaning data available on its Integrated Market Surveillance System. Through IMSS, it collects data for suspicious market activities through multiple sources, including its network systems at stock exchanges and other market infrastructure institutions.
According to sources, exchanges were believed to have been informed about the Ranbaxy deal after the midnight on Sunday. Entities suspected of having prior information about the deal before the official announcement are under the scanner, they added.
The combination of Sun Pharma and Ranbaxy would create the country’s largest pharmaceutical company with an estimated combined revenue of $4.2 billion. The entity would also be the fifth-largest speciality generics company in the world.
Meanwhile, exports from Ranbaxy plants at Toansa and Dewas to Europe would remain suspended as probes are continuing even as Indian authorities have withdrawn the certification of manufacturing standards from one of the units, European health regulator EMA said today.
The European Medicines Agency (EMA) said that Indian authorities have withdrawn certification to the Toansa plant, while an international inspection of the Dewas plant has been planned for June 2014.
“The EMA and national medicines authorities in the EU are progressing with their assessment of reports of non-compliance with Good Manufacturing Practice (GMP) at two Ranbaxy laboratories’ sites in India,” a EMA spokesperson told the news agency PTI. Exports from Toansa and Dewas sites to the EU will remain suspended, the spokesperson said without specifying a timeline for completion of investigations.
On the Toansa plant, the official said: “On March 26, 2014, Indian authorities withdrew the site’s ‘Written Confirmation’, effectively making the suspension of the exports official for the time being.”
The Written Confirmation is a document that accompanies all APIs (active pharmaceutical ingredients) exported to the EU to certify that relevant manufacturing standards have been met.
“In the meantime, the EMA and national medicines authorities in the EU are continuing to work together to ensure that failings previously identified at the site are fully resolved before there is a resumption of exports from the site to the manufactures in the EU,” it said. Ranbaxy had voluntarily suspended exports from the sites to the EU in January 2014.