Bhushan Steel under pressure; stock cracks over 40% in August alone

NEW DELHI: Shares of Bhushan Steel Ltd remained under intense selling pressure so far in the month of August after CBI arrested Neeraj Singal, Vice Chairman and Managing Director of Bhushan Steel Ltd (BSL), in connection with Rs 50 lakh bribery scandal involving CMD of Syndicate Bank S K Jain.

The stock plunged over 40 per cent including Friday's 10 per cent intraday fall. The stock was locked in 10 per cent lower circuit at Rs 219.35.

On August 2, CBI had arrested six accused, including the Chairman-cum-Managing Director of Syndicate Bank S K Jain, for allegedly taking bribe of Rs 50 lakh for increasing credit limit of some companies in violation of banking rules.

The recent fall has wiped out nearly Rs 4000 crore in market capitalisation on Friday 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 target price for Bhushan Steel's stock by 13 per cent to Rs 327 from Rs 377, while maintaining its 'Hold' rating after the development, ET reported.

"Until there is an adequate clarification, the regulatory overhang may keep the stock volatile in the near to medium term," said the report quoting 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.