MOSL: ANNUAL REPORT THREADBARE (ART) | SUN PHARMACEUTICAL FY18-Significant rise in related-party sales – at 30% of revenue
ANNUAL REPORT THREADBARE (ART) | SUN PHARMACEUTICAL FY18: Significant rise in related-party sales – at 30% of revenue
Sun Pharmaceuticals’ (SUNP) FY18 annual report highlights a significant increase in (a) related-party transactions – sales to entities controlled by key managerial personnel (KMP) increased to INR79.9b (30.2% of consolidated revenue) from INR0.1b in FY17 and (b) loans and advances given to non-related parties – up from INR10.4b in FY17 to INR23.3b, majority of which (~USD305.7m v/s ~USD9.9m in FY17) were extended by its subsidiary SUNP Global FZE. Investments in non-core assets stood high at INR191b, 50% of NW (FY17: INR169.1b, 46% of NW). Yield on non-core investments was low at 3% and borrowing cost stood high at 5% (gross debt at INR107.8b v/s INR100.2b in FY17), leading to a negative carry. Furthermore, deterioration in cash conversion days to 255 (FY17: 231) led to a decline in operating cash flow (OCF) by 49% to INR34.3b. Intangible assets stood high at INR107.2b (28% of NW), mainly due to acquisitions. Contingent liability, too, stood high at INR67.5b (18% of NW) due to income tax disputes.
Related-party sales at INR79.9b
- On a consolidated basis, sale of goods to entities controlled by KMP rose sharply to INR79.9b (v/s INR0.1b in FY17), 30.2% of revenue. Consequently, receivables from these entities increased to INR12.3b. The number of KMP-controlled entities increased to 12 from 5 in FY17. We believe the increased transactions are primarily due to newly added related parties.
Sun Pharmaceutical and its subsidiaries are principally engaged in developing, manufacturing and marketing generic pharmaceutical products and bulk drugs. Co.'s products are mainly for the following therapy areas: psychiatrists, neurologists, gastroenterologists, diabetologists, chest physicians, consultant physicians, orthopedics, oncologists, gynecologists, ophthalmologists and cardiologists. Generic names of three principal products of Co. is Pentoxifyline, Pentoparzole Sodium, and Metformin Hydrochloride. Co.'s business can be divided into four segments: Indian branded generics, U.S. generics, international branded generics (ROW) and Active Pharmaceutical Ingredients (API).
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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