"The good news is that the merger has been approved and now it will go ahead and therefore, the shareholders, the creditors and the institutions will all stand to gain as a result of the merger going ahead," says HP Ranina.
Sebi's investigation is unlikely to affect the merger given it will find issues involved in insider trading, which is a completely independent action and has nothing to do with the merger
HP Ranina
Corporate Tax Lawyer
After Andhra Pradesh high court vacates the stay and status quo on the proposed USD 4 billion Sun Pharma - Ranbaxy merger on Saturday, experts believe it is a positive step and will bring in some relief for the two pharma companies.
However, the court has directed market regulator Securities and Exchange Board of India (Sebi) to probe charges of insider trading that led to the stay on the merger.
Corporate lawyer HP Ranina believes Sebi's investigation is unlikely to affect the merger given it will find issues involved in insider trading, which is a completely independent action and has nothing to do with the merger. Merger is when two companies merge, the assets and liabilities are taken over by the amalgamation company but this has nothing to do with that.
According to Ranina, if somebody made a profit by getting information in advance about the merger and therefore, it had a windfall profit, that person will be in trouble and will be slapped with a penalty and perhaps people involved in the insider trading maybe suspended and may not be allowed to operate in the market, but that's a completely different issue altogether.
"The good news is that the merger has been approved and now it will go ahead and therefore, the shareholders, the creditors and the institutions will all stand to gain as a result of the merger going ahead," he says during a discussion on CNBC-TV18 .
Ranjit Kapadia of Centrum Broking adds to this positive sentiment saying, "There is slightly positive sentiment because now the merger process will initiate and it will give some relief to both the companies, because there was uncertainty in the market that how long the merger will hold because of the Andhra Pradesh High Court issue."
However, Vivek Reddy, advocate says, "In this particular case, one of the parties involved in the insider trading is Silver Street, which is a 100 percent subsidiary of Sun Pharma and so, a party to the merger is also a party to the insider trading and therefore, Sebi was asked to investigate into the matter and punish the wrong doer and prohibit them from accessing the market and getting a merger approved.
But Kapadia contradicts by saying the Sebi investigation will only affect Silver Street, because the main accuse of insider trading is Silver Street Investment."
"The merger swap ratio has been approved by the auditors, creditors, shareholders which is a separate issue but certainly the subsidiary company which has been involved in insider trading could be slapped with a hasty penalty so that whatever profits it has made could be recovered by way of penalty by Sebi and may also be suspended for a certain period of time from operating or accessing the market," adds Ranina.
Sun Pharma stock price
On May 23, 2014, Sun Pharmaceutical Industries closed at Rs 584.70, up Rs 4.60, or 0.79 percent. The 52-week high of the share was Rs 653.10 and the 52-week low was Rs 458.00.
The company's trailing 12-month (TTM) EPS was at Rs 0.95 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 615.47. The latest book value of the company is Rs 41.64 per share. At current value, the price-to-book value of the company is 14.04.
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