Graft-tainted firms the new pariahs on bourses

Not long ago, investors shied away from companies operating in sectors that faced the brunt of policy inaction.

Today, it is the turn of companies tainted by graft allegations to witness investors voting with their feet on the bourses.

The country's largest real estate developer DLF has seen its shares dip by 16.9 per cent over the last eight trading sessions and on Wednesday, IRB Infrastructure scrip fell sharply after reports alleged that BJP president Nitin Gadkari had favoured the company during his tenure as Maharashtra's public works minister.

IRB Infra shares fell by over 7 per cent during the day before it recovered to close at 142.75 witnessing a fall of 3.97 per cent over Tuesday's closing even as the Sensex at the BSE gained 33 points to close at 18,610.8.

Market experts say that while the balance sheets of these companies are highly leveraged, when allegations of corruption crop up, stock holders want to get into safer territory.

"While the lenders have recourse to the assets of the company in case of any eventuality, equity holders are last in the queue. Thus in a negative scenario they look to exit as they don't know what will happen to their holding," said the had of research of a leading brokerage firm who did not wish to be named. "All these issues have also led to low confidence in these companies."

Earlier, companies named in the 2G spectrum scam and those operating in the mining, power, infrastructure and capital goods sectors and also aviation have witnessed a sharp decline in their share prices over the last couple of years.

While the Sensex fell by 24 per cent in calendar 2011, the power and capital goods indices at the BSE fell by 66.4 per cent and 47.6 per cent respectively.

... contd.

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