GVK Power declines 5% on report ED probes promoters for money laundering

Shares of GVK Power and Infrastructure were locked in the 5 per cent lower circuit band, at Rs 3.23 apiece, on the BSE on Thursday after reports said the Enforcement Directorate (ED) is set to charge promoters of the GVK Group of companies for alleged money laundering after the Central Bureau of Investigation (CBI) accused them of alleged irregularities to the tune of Rs 705 crore in running the Mumbai airport.

“We are examining the CBI case and will be booking the accused under the Prevention of Money Laundering Act (PMLA) for alleged siphoning of funds through unfinished contracts and diverting the surplus funds of the MIAL for meeting personal expenses," a senior ED official told Business Standard. READ HERE

On June 27, CBI had registered a case against GVK group chairman GVK Reddy, MIAL and AAI officials for cheating and criminal conspiracy that allegedly caused loss to the tune of about Rs 1,000 crore to the government, the report added. 

According to CBI, AAI gave 200 acres of underdeveloped land to GVK for redevelopment. MIAL then allegedly gave "bogus contracts" to companies and siphoned off over Rs 310 crore. The GVK group allegedly used MIAL funds by entering into agreements with a company owned by the promoters' relatives. MIAL funds were allegedly used to book train and flight tickets and hotel rooms group employees not connected to the airport company.

On misusing reserve funds, the CBI FIR said that Rs 395 crore was used by GVK to finance their other group companies. “They fraudulently created forged board meeting resolutions of MIAL authorizing to keep the reserve surplus funds of MIAL as fixed deposit receipts (FDRs) with PSU banks at Hyderabad MIAL is Mumbai based company but they chose to deposits the funds in the form of FDRs with Hyderabad based branch of Bank of India, said the CBI in its probe report.

At 12:28 pm, the stock was still down 5 per cent with a combined 20.65 million shares having changed hands on the counter on the NSE and BSE. In comparison, the S&P BSE Sensex was ruling at 35,848.08 level, up 433.63 points or 1.22 per cent. Other group firm, Taj GVK Hotels and Resorts, too, declined 4.6 per cent in the intra-day trade.