5 Companies Hit Hardest By Nirav Modi Scam

Source: Vogue

The financial market of the country has recently been hit extremely hard by the infamous PNB scam with billionaire diamantine Nirav Modi at the epicenter. While some blame his apparent siphoning of funds on the lack of fraud detection schemes for the PSUs in India, others claim it to be the consequence of complete negligence of the second largest public sector bank of the country. It is inevitable for this episode to not only have a small scale impact but also prevent from exposing similar loopholes in the entire public sector.

With a great share of the banking sector now being superficially paralyzed, it’s only fair to have a look at the top 5 majorly affected by this event.

1. Gitanjali Gems Ltd.

One of the largest branded jewelry retailers in the world, this listed company is an accomplice to the Nirav Modi brand in the much talked about scam. But this isn’t the first time Mr. Mehul Choksi, Nirav’s uncle and business partner, has been involved in a case of fraud. The current happenings have also brought to light the Rs. 121 crore default he had committed on a loan repayment.

The company has lost about Rs. 435 crore or 60% of its market valuation since the scam was discovered and the share prices of the company have plummeted to the record low of Rs.26.10.

2. Punjab National Bank

Words wouldn’t do justice to the “catastrophic” effect 29th January 2018 had on the bank. Not only has it been prey to a default of Rs. 11,500 crores but also has touched the rock bottom with depositors’ withdrawing money from the bank. PNB also has a Rs. 1700 crore fund/non fund exposure to the Gitanjali Group posing a susceptible damage of a total of Rs. 13000 crores.

As for the market valuation, PNB has lost about Rs. 10,900 crores and its stock has lost about 42% in the past month. Recovery from this crisis seems far-fetched but much longed for for the bank.

3. Allahabad Bank

The billion-dollar fraud didn’t have PNB as the only bank involved. Various other banks    were influenced into lending Nirav Modi huge sums of money which happens to be the whole purpose of a LoU. Allahabad Bank lent them roughly Rs. 2,000 crores which has put them at an immense risk. From the day of discovery of the scam, the share price of this bank has fallen by about 24% to a drastic low of Rs. 52.20 per share. Its clients are losing trust in the bank leading to its not-longed-for dismissal in the banking sector of the country.

4. UCO bank (United Commercial Bank)

Just like the Allahabad bank, UCO too had lent out a hefty sum of $411.82 million out of the $1.8 billion fraud. As a result, it has been exposed to the critical public eye and scrutiny of the authorities. More than the monetary loss, these banks have been affected by the loss of trust as a result of their negligent actions. Not only have their market valuations dipped, but the predictions of their quarterly earnings have also fallen down the steep road. The UCO bank share price has witnessed a drop of about 15.55% now reaching a yearly low of Rs. 27.15 per share. The bank suffered a net loss of Rs 1,249.85 crores in Q3FY18. Its Gross NPAs stood at 13.03 per cent in Q3FY18 compared to 11.7 per cent in Q3FY17.

5. Nirav Modi Group

Finance Ministry sources claim that the Enforcement Directorate and the CBI officials have already seized gold, diamonds and precious stones worth Rs. 5100 crore and property worth Rs. 5,000 crores relating to the case. Also, Nirav’s passport has been revoked and three of his stores in Surat, four in Mumbai and two in Delhi have been sealed by the CBI.

Author | Shubhangi Gokhroo