Scam-spooked markets await next twist in probe.
Frissons went through Delhi, Mumbai and Chennai as the government got cracking on the 2G spectrum allocation scam.
The Central Bureau of Investigation (CBI) raided the Chennai offices of Kalaignar TV, reportedly owned by family members of Tamil Nadu Chief Minister and United Progressive Alliance ally M Karunanidhi, late Thursday night and early Friday morning.
The chatter in Delhi suggested irreversible damage had been done to the alliance between the Congress and the Dravida Munnetra Kazhagam. But it was clear that neither political party was ready to end the partnership just yet, although the chill in ties was palpable.
Simultaneously, industrialist and DB Realty promoter Shahid Usman Balwa was sent to judicial custody in the Delhi’s Tihar jail. This, along with the anticipation that several top industrialists would be called for questioning by the CBI, saw the markets turn jittery.
Some of the companies associated with the 2G spectrum scam have seen their market capitalisation erode amid fears that further arrests could follow. “The scam and its repercussions have instilled a sense of apprehension in the market and rumour mongers are having a field day,” said Nirmal Jain, chairman & managing director of Mumbai-based IIFL (India Infoline).
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Shares of Reliance Anil Dhirubhai Ambani Group companies fell between 5-8 per cent on the Bombay Stock Exchange (BSE) on Friday. Reliance Communications lost 6.80 per cent at Rs 93.15, while Reliance Infrastructure declined 5.60 per cent. The CBI had questioned R-ADAG Chairman Anil Ambani on Wednesday in connection with the 2G scam. (Click for the graph)
Major Essar group companies – Essar Shipping and Essar Oil – lost more than 5 per cent each on Friday to close at Rs 83.05 and Rs 106.45, respectively. The CBI had questioned Essar Group CEO Prashant Ruia on Thursday. Essar is alleged to have held a stake in Loop Telecom in violation of cross-holding norms. DB Realty fell 5.94 per cent to Rs 129.10. Unitech, whose Managing Director, Sanjay Chandra, was questioned by the CBI on Tuesday, lost 6.94 per cent at Rs 34.20.
Anant Raj Industries stock fell 19.61 per cent to Rs 76.05 on Friday after media reports suggested that its CEO, Amit Sarin, has been questioned by the CBI.
Six entities – R-ADAG, Essar Group, DB Realty, Unitech, Sun TV and Anant Raj Industries -- whose names have been linked with the 2G spectrum scam, have accounted for 43 per cent of the erosion in market capitalisation of all the companies listed on the BSE since former communications minister A Raja's arrest on February 2, according to BS Research Bureau.
“Markets are running on very low sentiment and short sellers are exploiting it. Stocks are being hammered on every bad news in the absence of buyers,” said Deven Choksey, managing director at K R Choksey Shares & Securities. “Traders are making the most of this opportunity,” he added.
The 2G scam investigation also hurt the broader market sentiment. The BSE Sensex fell 295.30 points, or 1.60 per cent, to 18,211.52. At the National Stock Exchange, the 50-stock S&P CNX Nifty declined 1.58 per cent, or 87.50 points, to 5,458.95.
The Chennai raids came against the backdrop of CBI's application filed with a local court in New Delhi that Kalaignar TV had received around Rs 214 crore from Cineyug Media, a company related to DB Realty. Balwa is also the promoter of Swan Telecom, an alleged beneficiary of the 2G spectrum allocation.
According to reports, a team of CBI officials from Delhi arrived in Chennai yesterday and conducted raids in the channel's offices from around 12 midnight to 5.30 am.
Sharad Kumar, managing director of Kalaignar TV, has repeatedly denied any connection with the 2G scam, stating that the funds from Cineyug Media was an advance for share transactions and was returned with interest after both parties differed on valuations. Followed by the denial, on Wednesday, he also invited the CBI to check the company accounts to clear the matter.
Kumar owns 20 per cent stake in the channel, while Karunanidhi’s wife, Dayalu Ammal, and daughter, Kanimozhi, own 60 per cent and 20 per cent, according to reports.
The CBI application filed with the Delhi court stated: “It has also come to light that there was a transaction of Rs 214 crore from Cineyug Films to Kalaignar TV in 2009.” The funds were arranged by Cineyug Films from DB Group companies, wherein the family members of Balwa are directors or shareholders, stated the investigating agency in the application.
But politically, it was the DMK that began distancing itself slightly from the Congress. It announced a seat-sharing arrangement with the Pattali Makkal Katchi party, granting it 31 Assembly seats and one Rajya Sabha seat without consulting the Congress, which is deeply unhappy about the alliance.
Kanimozhi, reportedly a shareholder in Kalaignar Films, on Friday denied that she had been asked by the CBI to depose before it. She spent a part of the day at rallies, joining in with the slogan shouting against the Central government for its treatment of Tamil fishermen detained and killed by the Sri Lankan navy. The slogans criticised the Centre for being ‘weak’ and ‘spineless’ in protecting Tamil interests.
The DMK-PMK alliance is also political insurance. Although only a few months are left for state elections, even if the Congress pulls out from the government in Tamil Nadu, the DMK can stay afloat with the help of the PMK. In a 235-member Assembly, the DMK has 99 MLAs while the PMK has 18. The number the DMK needs to stay in power: 117.