CBI case-hit firms' stocks crash

Shares of Syndicate Bank, Bhushan Steel and Prakash Industries fall between 4% and 20%

Shares of Syndicate Bank, Bhushan Steel and Prakash Industries plunged between four and 20 per cent on Monday, in the wake of Saturday's arrest by the Central Bureau of Investigation (CBI) of their officials for alleged involvement in a Rs 50-lakh bribery case.

The state-owned lender's shares ended down seven per cent, to close at Rs 134.45 a share. It declined 8.5 per cent during the day. Bhushan Steel closed down 4.2 per cent to Rs 378.15, after dropping as much as nine per cent during the day. Prakash Industries hit the lower circuit of 20 per cent during the first half of the day and closed at Rs 89 a share.

Shares of these entities tanked even as the overall market remained positive, due to heavy selling by investors fearing further action by the investigative authorities.  

On Saturday, CBI registered a bribery case against S K Jain, chairman of Syndicate Bank, and senior officials of Prakash Industries and Bhushan Steel, leading to their eventual arrest.

Jain has been accused of accepting a bribe of Rs 50 lakh for enhancing the credit limit of Prakash and Bhushan, both also named in the multi-crore coal scam.

On Monday, Syndicate Bank issued a notice to the exchanges acknowledging the case registered against its chairman. “We have taken steps for smooth running of the banking operations,” it added.

Market players said the impact could continue to loom over the three entities. “The bank’s stock had already run up in the recent rally and then corrected a bit before this incident came to light. The stock could remain subdued for some more time as the June quarter numbers have also not been strong,” said Sunil Jain, vice-president (equity research), Nirmal Bang Securities.

Experts say such news instances could impact investor sentiment towards public sector (PSU) banks in the long run.  “What is worrying for the market is that this has exposed the culture (of bribery) that is there in this entire PSU bank sector. There is no way of knowing to what extent this could impact the sector and its stocks,” said Daljeet Singh Kohli, head of research, IndiaNivesh Securities.

In the case of Bhushan Steel and Prakash Industries, the damage could be much more, said analysts. This is because involvement of the promoters has cast a shadow over the corporate governance norms at these two companies.