Bhushan Steel shares plunge 20% for second straight day

MUMBAI: Shares of Bhushan Steel plunged 20 per cent on Thursday for the second straight day after a Delhi court denied anticipatory bail to Neeraj Singhal, the company's chairman, in connection with the Syndicate Bank bribery case.

The stock closed at Rs 244 — the lowest permissible trading limit for the trade — on Thursday. The fall in the past two days has wiped out about 36 per cent of the company's value on the bourses.

Bhushan Steel's market capitalisation was at Rs 5,519 crore on Thursday compared with Rs 8,623 crore on Tuesday. LIC is the biggest minority shareholder in the company with 3.54 per cent stake.

Analysts said the case may weigh down the stock in the near-term as investors may keep to the sidelines till clarity emerges. Deutsche Bank has cut its taget price for Bhushan Steel's stock by 13 per cent to Rs 327 fromRs 377, while maintaining its 'Hold' rating after the development.



"Until there is an adequate clarification, the regulatory overhang may keep the stock volatile in the near to medium term," said Anuj Singla and Abhay Laijawala, analysts at Deutsche in a client note. "The stock is likely to trade at a discount to its past trading valuation multiples till more clarity emerges on this regulatory issue," they said.

The Central Bureau of Investigation (CBI) has arrested Syndicate Bank's chairman and managing director SK Jain for allegedly taking a bribe of Rs 50 lakh from Bhushan Steel for not converting a Rs 100-crore outstanding loan into a non-performing asset (NPA). This controversy could lead to a delay in Bhushan Steel's projects which could impacting the company's earnings.

Bhushan Steel is on the verge of ramping up its recently commissioned 2.5-million-tonne steel capacity expansion in Odisha. "Investors should avoid these kind of companies where there are allegations of management malpractice. The stock should remain under pressure and underperform the markets, going ahead," said Vinod Nair, head of research at Geojit BNP Paribas.