SEBI Bans Par Drugs Chemicals from Slump Sale to Promoter-Linked Entity

Sebi on Monday barred API manufacturer Par Drugs and Chemicals from going ahead with the proposed slump sale of its core business to a promoter-related entity, citing prima facie irregularities in valuation, shareholder communication and voting process.

In an interim order, Sebi restrained the Vadodara-based Par Drugs and Chemicals Ltd (PDCL) from executing the Business Transfer Agreement (BTA) signed on February 14, 2025, with Phal-Jig Fine Chemicals Pvt Ltd (PJFCPL) for Rs 95 crore.

The buyer firm is part of PDCL's promoter group, as per the order.

Sebi directed the National Stock Exchange to appoint an independent registered valuer to re-examine the business undertaking using recognised valuation standards and obtain a fairness opinion from a merchant banker.

PDCL, its management and signatories to the BTA have been directed to cease and desist from entering into any transaction which may lead to disposal of assets until further directions, the regulator said.

Both the valuation report and fairness opinion along with NSE's recommendation will have to be submitted within 15 days from the date of receipt of fairness opinion, it added.

"...prima facie view that the correctness of valuation methodology adopted by PDCL needs to be independently re-examined to ascertain whether the valuation is fair and reflective of true value of the undertaking being transferred through the proposed slump sale.

"It is also a matter of fact that the market capitalisation of PDCL has eroded by almost 70 per cent since the announcement of the slump sale at the stated valuation," Sebi's whole-time member Kamlesh Chandra Varshney said in the order.

PDCL has informed Sebi that the proposed slump sale is sought to be completed by September 20.

Therefore, Sebi said it is necessary to issue interim directions restraining PDCL from proceeding with any step that may result in the alienation, sale, or disposal of its assets, including the implementation of the BTA dated February 14, 2025, until completion of further investigation in this matter.

"If the proposed slump sale transaction is allowed to proceed, it could cause grave injustice to the public shareholders since the transaction would become irreversible upon execution.

"Thus, I find that there exist sufficient grounds to form a prima facie opinion that the proposed slump sale transaction by PDCL may be detrimental to the interests of public shareholders and warrants urgent intervention by Sebi in the form of interim directions," Varshney said.

The Securities and Exchange Board of India (Sebi) had received a complaint alleging that a proposed slump sale of business by PDCL is not compliant with the applicable law and is prejudicial to the interests of the public shareholders.