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Traders who had made bullish bets in the stock with borrowed money in recent weeks were forced to square off positions, as they could not cough up enough funds to cover the margin shortfall in the wake of the crash.
Unitech shares, which plummeted about 25 per cent to Rs 26.35 earlier in the day, closed at Rs 28.75 on the BSE.
Chandra, whose company Unitech, and Norway’s Telenor had set up telecom joint venture Uninor, was in jail in 2011 for his suspected role in the 2G telecom scam.
Shares of another property developer, DB Realty, whose promoters Shahid Balwa and Vinod Goenka were also embroiled in the 2G scam, fell 18.1 per cent to close at Rs 101.
Today, traders were stuck with long positions, as news of the Central Bureau of Investigation’s enquiry into its lawyer’s alleged collusion with Chandra in the 2G spectrum allocation scandal broke only after market hours. Analysts said though any enquiry was unlikely to affect Unitech’s operations, investors were uncomfortable with the company’s chief being dragged into another controversy. “When the promoters’ name is involved in any case, it is not well received by investors,” said Param Desai, analyst with Nirmal Bang Securities.
The controversy comes at a time when Unitech started finding favour with investors and traders. Till early 2012, the company had been an underperformer on the bourses, owing to high debt and promoters’ alleged involvement in the 2G telecom spectrum scam. The sentiment changed in 2012, with the stock rising about 70 per cent, against the Sensex’s 25 per cent gains, after the company exited the venture with Telenor. Investors felt the sell-off improved the company’s prospects in the real estate business.
The market was rife with talk a few leading investors, including a Mumbai-based billionaire, and operators had mopped up the stock last year.
Analysts said the weakness in the stock could be short-lived, as the company had moved away from the telecom business. “Unitech will continue to operate as it is, as the issue is related to the 2G case. The stock is reacting, as the managing director’s name is involved in it,” said Sharan Lilaney, realty analyst at Angel Broking.
A recent Edelweiss Securities report had said Unitech’s net asset value was Rs 17,300 crore, or Rs 66 a share, adjusting for net debt, unpaid land costs and exposure to the Uninor settlement.
