Sun Pharma Advanced Research Company Ltd. (SPARC) has issued an addendum to the Valuation Report originally dated January 1, 2026. This update addresses clarifications requested by the stock exchange subsequent to the Extraordinary General Meeting outcome in February 2026. The addendum clarifies scope definitions and justifies why the Income Approach, specifically the Discounted Cash Flow (DCF) method, was deemed inappropriate for valuing the clinical-stage company.
Context: Continuation of Previous Filing
This notification serves as a follow-up to a prior intimation dated January 29, 2026, regarding a Corrigendum to the EGM Notice. Following the EGM, the Company sought in-principle approval from the stock exchange. Subsequently, clarifications were sought concerning the Valuation Report prepared by Registered Valuer, Mr. Jinesh Shah, leading to the issuance of this Addendum.
Clarifications to the Valuation Report
The Registered Valuer provided two key clarifications to the original report:
1. Scope of Information Correction
Under the Scope of Information (page 7), the reference to financial statements for the period ended 30th September, 2025, has been corrected. It should now read: ‘Unaudited financial statements for the quarter ended 30th Sept 25, duly approved by the Board and subjected to limited review by the statutory auditors’.
2. Justification for Excluding the Income Approach
Detailed reasoning was provided for not utilizing the Income Approach, including the Price Earnings Capitalization Value (PECV) and the Discounted Cash Flow (DCF) methods (page 17). The rationale is that these methods rely on stable, future economic benefits.
-
Since the Company has consistently incurred persistent operational losses over preceding financial years, there are no sustainable or maintainable earnings to capitalize.
Difficulty in Applying DCF Methodology
The DCF method requires reliable projections, which are difficult to ascertain for SPARC due to its core business profile:
-
Business Model: SPARC is a clinical stage biopharmaceutical research and development company, predominantly focused on pre-clinical research, clinical trial execution, and novel technology development.
-
Investment Outflows: Activities entail continuous investment outflows, with revenue inflow contingent only upon successful late-stage development, out-licensing, or commercialization.
-
Scientific Uncertainty: Drug development success is inherently low probability, making projections for licensing income or royalties speculative and failing to meet reliability thresholds.
-
Lack of Predictable Revenue: The company lacks an established recurring revenue model, and historical results confirm the absence of predictable or stable inflows.
Conclusion on Valuation Approach
The DCF method specifically requires reasonably predictable revenues, identifiable cost structures, and sufficient operating history. According to the information provided, the Company does not meet these conditions. Consequently, the valuer concluded that valuation using the Income Approach is not appropriate and has not been considered in determining the final company valuation.
The Addendum to the Valuation Report is available on the Company’s website for public record.
Source: BSE
