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The share price of Mumbai-based highway infrastructure developer IRB Infrastructure came under pressure for its improper business links with Bharatiya Janata Party (BJP) chief Nitin Gadkari, as alleged in media reports.
The IRB share price crashed nearly 16 per cent on Thursday on heavy selling as it was alleged the company had extended a loan of Rs 164 crore to Purti Power and Sugar Ltd, controlled by Gadkari. It is also believed IRB's business rose when Gadkari was in power as a minister in Maharashtra, newspaper reports said.
IRB denied these allegations in a clarification issued to the stock exchanges. However, analysts fear many past projects handled by the company might too come under a scanner.
The share closed at Rs 119 on Bombay Stock Exchange (BSE) but had touched a low of Rs 114. The annual low of the share price is Rs 100. In a filing to BSE, the company said it would announce a second interim divided to its shareholders if it was declared during its board meeting to be held on November 5.
One of the companies promoted by IRB's founder family also collects toll tax on the Mumbai-Pune Expressway and Bandra-Worli Sea Link.
Investment advisor S P Tulsian is of the view investors should stay away from any firm where there are serious charges of indulging in corruption and other corporate governance lapses.
"It is coming out that IRB is connected to politicians from the Opposition party and, thus, the ruling party will see to it that the matter is investigated thoroughly. It is likely the projects that IRB has handled in the past too will be put under scanner," he said.
Virendra Mhaiskar is the chairman and managing director of the Rs 3,000-crore company. Mumbai Entry Point, promoted by Mhaiskar collects toll tax.
The IRB Group has built 19 roads, most of them in Maharashtra and its order book is worth Rs 7,700 crore with 16 more road projects in pipeline. Besides, IRB has a 1,200 acre land bank along the Mumbai-Pune Expressway.
This is not the first time that IRB stock came under selling pressure. In May, news reports suggested that Mhaiskar was being investigated in connection with the 2010 murder of RTI activist and he was asked to take lie-detector test by Central Bureau of Investigation.
When Gadkari was the Public Works Department Minister, IRB is said to have bagged the Rs 104-crore build-operate-transfer project to widen and maintain a 25 km road stretch between Bhiwandi and Thane. Besides, when the Shiv Sena-BJP was in power between 1995 and 1999 and Gadkari was the minister, it received five contracts valued at close to Rs 50 crore, media reports have said.