Uncertainties loom over Ashoka Buildcon

Analysts say unless the firm's name in a case of financing construction projects for a former minister's family is cleared, overhang on the stock may remain

The stock price of Ashoka Buildcon fell 20 per cent and was locked in the lower circuit limit in Wednesday's trade, after media reports on joint searches by the enforcement directorate (ED) and income tax (I-T) department on the company.

This was reportedly in connection with charges that Ashoka financed some constructions projects for the kin of a former Maharashtra minister. However, the charges are yet to be ascertained and analysts feel the stock’s reaction was knee-jerk. Nevertheless, they say, till the allegations are cleared, overhang on the stock might remain. Likewise, the Street will keep a close watch on the ED’s case regarding the former minister.

The company, in a statement to the BSE exchange, said it was in the process of collating and responding to all the queries raised by the I-T authorities.

Analysts are not in a hurry to review their recommendation on the stock. “Given the promoters’ reputation and track record, only if no clarity emerges in the next two-three months would we review our call,” said an analysts from a domestic brokerage, on condition of anonymity.

On Wednesday, according to Bloomberg, there was only one new recommendation on the stock, from Ambit Capital. It gave a ‘buy’ report, with a target price of Rs 225.