[aaykarbhavan] Fw: Pre-Print Highlights of ITR from CLI & Company Cases

www.cliofindia.com info@cliofindia.com

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COMPANY CASES (CC) HIGHLIGHTS

ISSUE DATED 29-11-2013 Volume 181 Part 5

SUPREME COURT	HIGH COURTS	ENGLISH CASES	CLB
SAT	DRAT	STATUTES	JOURNAL
NEWS-BRIEFS

HIGH COURT JUDGMENTS

F Contract between parties not reduced to writing cannot be concluded that no services was rendered or that there was dispute regarding dues, petition for winding up admitted : M. R. A. Associates India P. Ltd. v. Seven Seas Hospitality P. Ltd. (Delhi) p. 282

F Notice to Central Government of petitions u/ss. 397 and 398 mandatory : Form of notice, manner of its service and identity of server not mandatory but directory : Union of India v. Company Law Board, Mumbai Bench (Bom) p. 290

F CLB or court has powers to remove statutory auditor, approval of Central Government not necessary : Union of India v. Company Law Board, Mumbai Bench (Bom) p. 290

F Vicarious liability of independent directors regarding dishonour of cheque issued by company : Absence of foundation on which prosecution could build edifice amounts to abuse of process of court : Briji Gopal Daga v. State of Kerala (Ker) p. 320

F Where no material to show transfer of fund to indicate inter-mingling of dovetailing of finances of two companies, no case made out for lifting of corporate veil : Store One Retail India Ltd. v. Century 21 Infrastructure Ltd. (Delhi) p. 332

STATUTES AND NOTIFICATIONS

Circulars :
SEBI Circulars :
F Investment by Qualified Foreign Investors (QFIs) in "to be listed" Indian Corporate Debt Securities-CIR/IMD/FIIC/13/2013, dated August 13, 2013 p. 96

Rules :
F Patents (Amendment) Rules, 2013 p. 86

F Securities Contracts (Regulation) Amendment Rules, 2013 p. 85

Notifications :
F Companies Act, 1956 : Notification under section 25(6) : Exemption to electoral trust from section 293A(1)(b), (2) p. 82

F Reserve Bank of India Act, 1934 : Notification under section 42(6)(a) : Inclusion in Second Schedule p. 83

F Securities and Exchange Board of India Act, 1992 : Notification under section 3(4) : Establishment of local office p. 82

F Securities Contracts (Regulation) Act, 1956 : Notification under sections 16(1) and 28(2) : Prohibition of certain contract p. 83

JOURNAL

F Buy-back of shares : A comparative analysis of Indian and UK laws-Pankaj Sevta and Shubhanshu Gupta p. 97

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On Saturday, 30 November 2013 5:09 PM, "info@cliofindia.com" <info@cliofindia.com> wrote:

Rs. 1,530/- Paper Bound Edition (Two Volumes)

www.cliofindia.com info@cliofindia.com INCOME TAX REPORTS (ITR) HIGHLIGHTS OnLine Edition Vol. 1 Print Edition Vol. 359, Part 1, dated 2-12-2013 SUPREME COURT HIGH COURTS ENGLISH CASES CLB SUPREME COURT HIGH COURTS ENGLISH CASES CLB SAT DRAT STATUTES JOURNAL SAT DRAT STATUTES JOURNAL NEWS-BRIEFS AAR TAXATION TRIBUNAL CESTAT NEWS-BRIEFS AAR TAXATION TRIBUNAL CESTAT ONLINE EDITION HIGH COURT JUDGMENTS F Remand for recomputation of investment allowance : No jurisdiction in AO to consider admissibility of investment allowance : CIT v. V. S. Dempo and Co. Ltd. (Bom) p. 523 F AO after detailed enquiry and considering assessee's disclosures allowing deduction : Revision not permissible : CIT v. Vodafone Essar South Ltd. (Delhi) p. 526 F Notice after four years : No failure by assessee to disclose material facts : Notice not valid : CIT v. Gujarat Mineral Development Corporation Ltd. (Guj) p. 532 F Communication received from Governmental agency under exchange of information in terms of DTAA that assessee received money not shown in its books : Prima facie ground for reassessment : Notice valid : Mitsui and Co. India P. Ltd. v. ITO (Delhi) p. 534 PRINT EDITION HIGH COURT JUDGMENTS F Transfer of entire business : Assessee entitled to exemption under section 10A : CIT v. Heartland KG Information Ltd. (Mad) p. 1 F Withdrawal of circular clarifying that tax need not be deducted if non-resident did not have permanent establishment in India in October 2009 : Payment not to be disallowed : CIT v. Angelique International Ltd. (Delhi) p. 9 F Appropriate Authority ignoring court orders twice and giving same reasons which court found not good enough to sustain acquisition of property : Pre-emptive purchase not warranted : Satish Balan v. Union of India (Bom) p. 15 F Nature and complexity of accounts of assessee satisfied : Direction for special audit warranted : Hiranandani Foundation v. Joint Director of Income-tax (Exemption) (Bom) p. 29 F Income from delivery based transactions with investment motive : Short-term capital gains : CIT v. Om Prakash Suri (No. 1) (MP) p. 39 F Income from futures and options transactions and daily trading in shares with business motive : Business income : CIT v. Om Prakash Suri (No. 1) (MP) p. 39 Sum received by assessee upon sale of land not as loan or advance : Sum not taxable as deemed dividend : CIT v. Om Prakash Suri (No. 2) (MP) p. 41 F Determination of arm's length price after notice to assessee and hearing it : Assessee had alternate remedy : Handalco Industries Ltd. v. Additional CIT (Bom) p. 46 F Farmers selling their produce to traders against post-dated cheques : Taking cheques to assessee for discounting for cash : Not a case of assessee taking loan or deposit from agriculturists or repaying loan to agriculturists : CIT v. Dineshchandra Shantilal Shah (HUF) (Guj) p. 57 F Modvat credit on account of excess of excise duty and additional customs duty paid by assessee on purchase of raw material : Allowable : CIT v. Samtel India Ltd. (Delhi) p. 62 F Original assessment after scrutiny : No new material showing escapement of income from assessment : Notice not valid : CIT v. Fujistu Optel Ltd. (MP) p. 67 F Assessee acquiring cars after 1-4-2001 under scheme of amalgamation : Assessee entitled to depreciation : CIT v. Mira Exim Ltd. (Delhi) p. 70 F Consultants declaring professional fees in returns and paying tax thereon : Levy of interest not justified : CIT v. Apollo Hospitals International Ltd. (Guj) p. 78 F Retiring partner taking only money towards value of his share : No profits or gains payable by firm under section 45(4) : CIT v. Dynamic Enterprises [FB] (Karn) p. 83 F Claim made in course of scrutiny assessment to loss on account of loan to subsidiary company being written off : Not a case of concealment of income for levying penalty : CIT v. DCM Ltd. (Delhi) p. 101 F Additions based on reasons recorded prior to notice deleted and that order becoming final : Reassessment on grounds recorded after issue of notice not valid : CIT v. Living Media India Ltd. (Delhi) p. 106 F Reassessment : Grounds must be recorded before issue of notice : CIT v. Living Media India Ltd. (Delhi) p. 106 F Purchase by investment company to obtain right to manage vendor company : Shares held for more than thirty months before sale : Profits from sale of shares assessable as capital gains : Accra Investments P. Ltd. v. ITO (Bom) p. 116 F Addition relying on statement of a third person without opportunity to assessee : CIT v. P. C. Chemicals (Delhi) p. 129 F TPO has jurisdiction to consider transactions not reported by assessee and transactions not referred to him by AO where proceedings pending before him on 1-6-2011 : Vodafone India Service P. Ltd. v. Union of India (Bom) p. 133 F AO cannot deviate from order of TPO : Vodafone India Service P. Ltd. v. Union of India (Bom) p. 133 F International transaction : Arm's length price : More efficacious remedy by filing objections before DRP : Vodafone India Service P. Ltd. v. Union of India (Bom) p. 133 F High Court remitting assessee to avail of alternative remedy without prejudice its and contentions : Not a ground to refuse to entertain petition : Vodafone India Service P. Ltd. v. Union of India (Bom) p. 133 F TPO's order and AO's draft order merged in order of DRP : Orders passed in proceedings pursued by assessee without prejudice to its rights and pursuant to orders of court : Writ petition maintainable : Vodafone India Service P. Ltd. v. Union of India (Bom) p. 133 STATUTES AND NOTIFICATIONS F From Our Reporter at the Supreme Court : Block assessment : Assessment of third party : Satisfaction of Assessing Officer . . . 1 Undisclosed income . . . 1 Undisclosed income : Statement made by assessee under section 132(4) : Evidentiary value . . . 2 Book profits : Computation : Proportionate expenditure attributable to exempted income . . . 2 Business expenditure : Expenditure from which incidental benefit arises to others . . . 2 Capital gains : Transfer when took place . . . 2 Capital or revenue receipt : Donations received towards corpus of trust . . . 3 Charitable purpose : Exemption . . . 3 Exploration of mineral oil : Presumptive tax : Mobilisation charges whether includible in gross revenues . . . 3 Export : Special deduction : Sale of scrap whether includible in turnover . . . 4 Non-resident : Liability to file return and applicability of transfer pricing provisions and minimum alternate tax provisions where no liability to tax arises . . . 4 Royalty : Payments for shrink wrap cassettes and CDs whether royalty . . . 4 Reassessment : Whether failure to disclose material facts for assessment . . . 5 Return of income : Footnote : Effect of . . . 5 F C. B. D. T. Circulars : Circular No. 9 of 2013, dated 19th November, 2013-Clarification in respect of Circular No. 5 of 2010-F. No. 142/13/2010-S.O. (TPL) dated 3-6-2010-regarding . . . 7 F Notifications : Income-tax Act, 1961 : Notification under section 10(23C)(vi) : Institution approved for purposes of section 10(23C)(vi) . . . 7 Notification under section 94A(1) : Notified jurisdictional area . . . 8 Notification under section 117(1) and (2) : Appointment of income-tax authority . . . 6 Notification under section 118 : Subordinate officers specified . . . 5 JOURNAL F Securitisation trusts-Concept in the Income-tax Act, 1961, as introduced by the Finance Act, 2013-T. N. Pandey, Retd. Chairman, CBDT p. . . . 1 F Inclusion of deemed dividend in the Income-tax Act - A need-Dr. Satish Chandra, Justice, Allahabad High Court, Lucknow Bench, Lucknow p. . . . 13 COMPANY LAW INSTITUTE OF INDIA PVT. LTD. No. 2, Vaithyaram Street, T.Nagar, Chennai - 600017. Phone: (044) 24350752 - 55 Fax: (044) 24322015 info@cliofindia.com To Unsubscribe : Reply back with "Unsubscribe" in subject followed by the key word "ITR" or "CC" or "VST" or "CCD" or "ITR (Trib)" or "GSTR", respectively or "All" if you do not want any Email. ITR : Income Tax Reports, CC : Company Cases, VST : VAT and Service Tax Cases, CCD : Consolidated Commercial Digest, GSTR : Goods and Service Tax Reports, ITR (Trib) : ITR'S Tribunal Tax Reports. Also send your feedback or comments to info@cliofindia.com

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[aaykarbhavan] Vodafone TP: Tax Dept Should Not Cause Misery And Harass Taxpayers: Bombay High Court

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Vodafone India Services Pvt. Ltd (No. 2) vs. UOI (Bombay High Court)

Transfer Pricing: Existence of income is a jurisdictional requirement for the applicability of T. P. provisions. AO must deal with it after giving personal hearing before making reference to TPO. The dept should not treat the assessee as an adversary who has to be taxed, no matter what

The assessee, an Indian company, issued equity shares at the premium of Rs.8591 per share aggregating Rs.246.38 crores to its holding company. Though the transaction was reported as an "international transaction" in Form 3 CEB, the assessee claimed that the transfer pricing provisions did not apply as there was no income arising to it. The AO referred the issue to the TPO without dealing with the preliminary objection. The TPO held that he could not go into the issue whether income had arisen or not because his jurisdiction was limited to determine the ALP. He held that the assessee ought to have charged the NAV of the share (Rs. 53,775) and that the difference between the NAV and the issue price was a deemed loan from the assessee to the holding company for which the assessee ought to have received 13.5% interest. He accordingly computed the adjustment for the shares premium at Rs. 1308 crore and the interest thereon at Rs. 88 crore. The AO passed a draft assessment order u/s 144C(1) in which he held that he was bound u/s 92-CA(4) with the TPO's determination and could not consider the contention whether the transfer pricing provisions applied. The assessee filed a Writ Petition challenging the jurisdiction of the TPO/AO to make the adjustment. On the merits of the adjustment, the assessee filed objections before the DRP. Before the High Court the assessee argued that (i) it was a precondition before the transfer pricing provisions apply that there has to be income arising to the assessee. As the allotment of shares at a premium does not give rise to income, the transfer pricing provisions do not apply, (ii) there was a breach of natural justice because neither the TPO nor the AO had heard the assessee on, or decided, the fundamental issue as to whether the transfer pricing provisions applied at all, (iii) the DRP does not offer an alternative remedy because the DRP has no power to quash the draft assessment order even if it is satisfied that the same is without jurisdiction & (iv) the DRP cannot take an unbiased view because one of its members is the DIT (TP). HELD by the High Court:

(i) The assessee's contention that the DRP does not offer an alternative remedy because it does not have the power to quash the assessment order even if it is satisfied that the same is without jurisdiction is not acceptable because in Vodafone 37 taxmann.com 250 it was held that the DRP's power to confirm would include the power not to confirm and to annul the draft assessment order;

(ii) It is clear from s. 92(1) that there must be income arising/ potentially arising by an international transaction for the application of the transfer pricing provisions. This is a jurisdictional requirement and has to be dealt with by the AO when specifically raised by the assessee before making reference to the AO. Grant of personal hearing before referring the matter to the TPO has to be read into s. 92CA(1) in cases where the very jurisdiction to tax under Chapter X is challenged by the assessee (Veer Gems 351 ITR 35 (Guj) disagreed with to the extent it holds that no hearing is required at the stage of reference to the TPO even on jurisdictional issues). If, after the hearing the assessee, the AO holds that there is an international transaction, that would be binding on the TPO;

(iii) The department's contention, based on CBDT Instruction No.3 dated 20.05.2003, that the action of the AO in referring the international transaction is a mere administrative act is not acceptable. The AO is bound to hear the assessee in respect of jurisdictional issues before making the reference. The failure to do so is an illegality;

(iv) The assessee's contention that the DRP would not give a fair hearing as one of its members is the DIT (TP) is not acceptable because it overlooks the fact that these are not appeal proceedings but to finalize the draft assessment order. Also, the DIT(TP) who approved the TPO's order is not on the panel;

(v) The Revenue should keep in mind the sage advice of Nani Palkhivala that the department should not cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice. In this case it would be natural for the assessee to feel harassed as neither the AO nor the TPO gave a hearing or dealt with the preliminary objection. It is hoped that the revenue will be more sensitive to the just demands of the assessee and not treat the assessee as an adversary who has to be taxed, no matter what;

(vi) The DRP should decide the assessee's objection regarding chargeability of alleged shortfall in share premium as a preliminary issue. In case the DRP's decision on the preliminary issue is adverse, the assessee shall be entitled to challenge it in a writ petition if it can show that the DRP's decision on the preliminary issue is patently illegal notwithstanding the availability of alternate remedy before the ITAT.

(Click Here To Read More)

 

Regards,

 

Editor,

 

itatonline.org

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Latest:

Maharashtra Housing & Area Development Authority vs. ADIT (ITAT Mumbai)

AO's action of recovering outstanding taxes without affording reasonable time to take remedial steps is a misuse of powers and a gross violation of the directions laid down by the Courts. AO has to refund the taxes recovered

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[aaykarbhavan] Business standard and Businessline news update 30-11-2013

No change in pharma FDI policy


BS REPORTER

New Delhi, 29 November

The government has decided to continue with the current foreign direct
investment ( FDI) policy for the pharmaceutical sector, brushing aside
the long- drawn proposal of the commerce ministry.

The Anand Sharma- led ministry has been advocating a lower FDI cap in
brownfield, or existing ,drug making units, along with various
safeguards for acquisition of domestic critical care pharma companies
by multinational firms.

While there is no change in the FDI cap, the Cabinet decided to bring
in a breather for domestic players in the sector by doing away with
any noncompete clause in such agreements. This may mean that domestic
companies divesting stake in their drug manufacturing business can
continue to compete with separate ventures in the sector.

After the Cabinet meeting on Thursday, government representatives
indicated a decision on the pharmaceutical FDI policy was deferred,
following objections from the finance ministry and the Planning
Commission. But in a statement on Friday, the government said the
current pharma policy would continue.

"The Cabinet decided that the current policy in brownfield and
greenfield projects in the pharmaceutical sector will continue,
subject to the additional condition that in all cases of FDI in
brownfield pharma, there will not be any non- compete clause in any of
the inter- se agreements," the government said in a statement on
Friday.

Currently, the government allows 100 per cent FDI in both greenfield
projects and brownfield drug- manufacturing companies.

While investments in greenfield are allowed through the automatic
route, those in brownfield or existing facilities must be approved by
Foreign Investment Promotion Board.

The Department of Industrial Policy and Promotion (DIPP), under the
commerce ministry, had proposed a lower cap of 49 per cent for foreign
investment in rare or critical pharma verticals.

The contentious policy was stuck for long, primarily between four key
entities– the health ministry, the commerce ministry, the finance
ministry and the Planning Commission. While the ministries of health
and commerce were pushing for stringent rules and a lower cap on FDI
in brownfield or existing pharmaceutical companies, their proposal met
strong opposition from various other stakeholder ministries, including
finance ministry and the Planning Commission.

Earlier this year, various FDI proposals in pharma sector, seeking
approval from FIPB were delayed because of interministerial
differences. Later, with the intervention of Prime Minister Manmohan
Singh, the government, to bring down the its current account deficit,
decided to clear the pending proposal which included a whopping $ 1.8
billion investment proposal by US generic drug maker Mylan Inc to
acquire Strides Arcolab's injectible unit – Agila Specialities.

However, the government had then decided to create safeguards for
future foreign investment proposals in the pharma sector in the wake
of concerns that acquisition of existing critical drug- manufacturing
facilities could lead to a significant hike in prices of medicines,
while also creating a shortage of some drugs.

But, the latest decision of the Cabinet appears to have been backed by
the government's immediate financial needs.

Apart from seeking a lower cap of 49 per cent, DIPP had also sought to
bar foreign investors from divesting manufacturing, and research and
development (R& D) facilities in case of transfer of ownership of an
existing pharma firm and sought to impose a three- year lock- in on
investment. The proposal also sought to mandate foreign investors
direct 25 per cent of their total investments into research. The
proposed policy also defined ' rare and critical' as those drug
segments that had just five or limited Indian manufacturing units.
Besides, acompany with 40 per cent or more share in the domestic
market for any particular drug, would also be classified as rare and
critical.

Cabinet exempts some agriculatural exporters from stockholding limit

To facilitate larger export of food and agriculture items, the Union
Cabinet has exempted exporters who have IEC Code issued by the
Directorate General of Foreign Trade ( DGFT) from stockholding limits
imposed under the Essential Commodities Act, 1955. However, this
exemption will be only available for exporters of edible oilseeds,
edible oil and rice and will be limited only to the stocks meant for
export and not domestic sale. " This will help exporters benefit from
economies of scale and bigger operation for optimally meeting export
demands on along- term basis," an official statement issued on Friday
said. India's agriculture exports rose to a record ₹ 231,993 crore in
2012- 13, up 24 per cent from the previous year due to the lifting of
bans on various items. In 2012- 13, India has emerged as the world's
biggest rice exporter at 11 million tonnes.

Source Business line

RoC finds 15 violations of company law by NSEL

K.R. SRIVATS

THOMAS K. THOMAS



Asks Ministry to move Company Law Board

NEW DELHI, NOV. 29:

The Registrar of Companies has found total corporate governance
failure at the crisis-ridden National Spot Exchange Ltd.

"There was utter lack of transparency, integrity, competence,
compliance with law and ethics," an interim report of the RoC said.

The report, submitted after an inspection of NSEL, also highlighted 15
instances of company law violations besides the fact that Brand India
has been tarnished by several irregularities.

The Corporate Affairs Ministry may approach the Company Law Board
seeking supersession of the NSEL Board, the report recommended.

"The Ministry may seek appropriate relief from CLB to protect public
interest and safeguard the interest of those dealing with NSEL," it
said.

The Ministry will have to file a petition before the CLB seeking to
either displace the current Board or appoint external persons as was
done in the case of Satyam Computer, S. Balasubramanian, former
Chairman of Company Law Board, told Business Line.

If the Ministry knocks the CLB doors on the NSEL matter, then the
situation could be similar to the one at Satyam Computer when the
Government moved in to appoint (on behalf of the CLB) external persons
to run the company.

While the Ministry was lauded for moving in fast in the Satyam
Computer issue, things are different this time round.

The speed was certainly missing, probably because the entity involved
was not a listed one, say corporate observers.

IRREGULARITIES

The inspection has revealed several irregularities including failure
of the NSEL Board in performing its fiduciary duties towards
shareholders.

The board of directors has not bothered about the functioning of the
exchange (spot). Business of the company was not carried according to
prudent commercial practices/public interest, the report said.

srivats.kr@thehindu.co.in




--

CS A Rengarajan
9381011200

CS Benevolent Fund is a collective effort towards extending the much
needed financial support to the community of Company Secretaries in
times of distress Let us lend support and join for noble cause.



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Investor's Eye: Pulse - Q2FY2014 GDP growth improves to 4.8%; Update - Sun Pharmaceutical Industries

 

Investor's Eye [November 29, 2013]  Sharekhan www.sharekhan.com

Summary of Contents     PULSE TRACK Q2FY2014 GDP growth improves to 4.8% India's gross domestic product (GDP) for Q2FY2014 came in at Rs13,68,594 crore, registering a year-on-year (Y-o-Y) growth of 4.8%, broadly in line with the market estimates. While growth in agriculture and the other constituents like financing, insurance, etc was better than expected, growth in the services segment slumped to 5.9% in Q2FY2014 which is lowest since 2005. In Q2FY2014 the growth in the industrial sector revived to 2.4% after slumping down to its lowest in about 4.5 years at 0.2% in Q1FY2014. The pull back in the industrial sector is attributed to equitable growth from across the constituents. The growth in the agricultural sector improved to 4.6% from 2.7% in Q1FY2014. However, the growth in the services sector plummeted to 5.9% from 6.6% in Q1FY2014, mainly due to the decline in the community social services segment (4.2% vs 9.4% in Q1FY2014). From an expenditure perspective, consumption grew by a mere 1.7% YoY as the government consumption dipped by 1.1% YoY. Moreover, the private consumption was dismal at 2.2% in Q2FY2014. The gross fixed capital formation grew by 2.6% YoY as compared with a decline of 1.2% in Q1FY2014, indicating no major recovery on the investments side. No major surprise on GDP, as inflation remains the key monitorable from the monetary policy point of view: A better than expected performance from the agriculture segment and other sectors like financing, insurance and real estate contributed to a slightly better GDP growth in Q2FY2014. While the service sector growth could bottom out (5.9% in Q2FY2014), slower growth in the manufacturing sector remains an overhang on the overall economic revival. The recent trends indicate that the GDP growth could have bottomed out in Q1FY2014 (4.4% growth), though the pace of revival is likely to be sluggish due to a weak investment cycle. Since Q2FY2014 GDP numbers were broadly in line, the RBI's focus will shift to other macro-data like inflation and trade data to take an appropriate call on rates in its mid-quarter policy on December 18. STOCK UPDATE Sun Pharmaceutical Industries Recommendation: Buy Price target: Rs654 Current market price: Rs572 Taro's tender offer to sweeten valuation  Key points Taro Pharma's buy-back offer favourable for Sun Pharma: Taro Pharmaceutical Industries (Taro Pharma), which is a 65.89% subsidiary of Sun Pharmaceutical Industries (Sun Pharma), has announced a tender offer to buy back up to $200 million of its ordinary shares from the open market at a price not exceeding $97.50 but not less than $84.50 per share. The buy-back, if fully subscribed, implies 5.5% and 6.2% increment in the annualised earnings per share (EPS) at the higher and the lower price band respectively. This also implies an increase in Sun Pharma's stake in Taro Pharma from 65.89% currently to 69.1% and 69.6% at the higher and the lower price band respectively, in case Sun Pharma does not participate in the tender offer. However, as per offer documents, Sun Pharma may or may not participate in the tender offer. Sun Pharma currently holds 79.7% of voting powers in Taro Pharma.  Decent upside potential with scope of roll-over of valuation to FY2016E earnings in next few months: The stock of Sun Pharma has corrected by 11% from a peak of Rs651 since mid October this year, despite a strong performance in H1FY2014. The current market price implies 22.9x estimated earnings for FY2015, which is a 10% premium to the three-year average earnings (one-year forward earnings basis). We believe Sun Pharma would maintain its premium valuation as incremental earnings would continue to flow in from the newly acquired entities and cash-rich position will provide a premium related to merger and acquisition opportunities. Moreover, there is upside to our current price target once we introduce our FY2016 estimates and roll over the valuations to one-year forward estimates a couple of months down the line. Thus, the correction is an opportunity to buy into a quality pharmaceutical (pharma) company with a reasonably high scope for appreciation over the next 12 months. We maintain our Buy recommendation on the stock with a price target of Rs654 (implies 26x FY2015E EPS). Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards, The Sharekhan Research Team

 

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