Just when economic factors were finally tilting in favour of realty majors thanks to the government allowing FDI in multi-brand retail, governance issues are returning to haunt their shares as India Against Corruption activist-turned-politician Arvind Kejriwal revealed a murky politician-builder nexus behind land deals in Delhi and Haryana.
Shares of Indiabulls Group companies, GMR and DLF are trading lower on the bourses today after Kejriwal accused these real estate companies of having investments by politicians.
Kejriwal had said that there was information that a lot of people had invested in BPTP and Indiabulls. He is seeking information from the public about these firms and is likely to make a list of the nexus between politicians and these companies.
Shares of Indiabulls Real Esate are down 8.5 percent, Indiabulls Financial Service 5 percent and Indiabulls Securities 5 percent on heavy volumes.
Meanwhile, Kejriwal produced documents that show deeper links with Robert Vadra and favours from the Haryana government, intensifying the pressure on DLF. The stock is down 4 percent today. The drop came despite DLF saying it enjoyed no special favours from the Haryana government. In a statement issued on Tuesday the company rejected Kejriwal's charges as a 'bunch of lies'.
The DLF stock has fallen 11 percent in the last three days, Investors are clearly cautious that any enquiry into the allegations will be damaging to the Gurgaon-based company.
Stock analyst SP Tulsian told CNBC-TV18 that controversies have always surrounded DLF and that is why its share-value has considerably eroded. Tulsian said the litigation would force the court to direct the government and the regulatory authorities to probe affairs of the company.
Earlier this year, Canada-based research firm Veritas had also accused DLF of undertaking “questionable related-party transactions” to boost the value of DAL (DLF Assets) prior to its acquisition by the company.
Moreover, the fact that independent directors have also expressed ignorance about the Rs 65 crore interest-free loan given to Vadra implies the problem of corporate governance has again resurfaced.
The company is already riddled with debt of over Rs 22,000 crore and the allegations are likely to weigh on DLF's efforts to divest its non-core assets."They really do not help investors look at the stock positively. DLF would continue to slide down" Prakash Diwan, Chief Portfolio Strategist, Prakash Diwan's Wealth Circle,told ET Now in an interview.