Ashoka Buildcon tanked 20% on reports of IT Raids

Ashoka Buildcon shares hit lower circuit and slumped 20 per cent to Rs 136 after reports appeared that the company's Nasik office was raided by the Income Tax department on Tuesday.

As per PTI report, Enforcement Directorate and Income Tax department on Tuesday conducted joint searches at the office of Ashoka Buildcon and the residence of its head in connection with allegations that it financed certain construction by family of ex-deputy chief minister Chhagan Bhujbal, arrested last month in a money laundering case.

On above issue the company has clarified on March 26, 2016, that it has neither financed any construction by the family of former Maharashtra Deputy Chief Minister Chhagan Bhujbal nor sponsored then MP Sameer Bhujbal's trip to FIFA World Cup in South Africa.

The trading volumes on the counter with a combined 62.7 lakh shares on the BSE and NSE till 3:00 pm and still there were pending sell orders for 9 lakh Shares on both the exchanges.

For nine months ended December 31, 2015, the company’s consolidated net profit jumped by 50.6 per cent at Rs. 65.76 crore and revenue grew by 24.3 per cent Rs 1885.27 crore. It has robust engineering, procurement and construction (EPC) order book of Rs 3,570 crore and it also has L1 order of Rs 810 crore. In borrowings front, it has, are relatively low compared with peers i.e. net debt-to-equity ratio is 0.1, which is quite attractive for an infrastructure player.

However, the above matter is more serious and it may take a longer time to get resolved. Going forward, it will continue to be volatility on this counter. Hence, our advice to the investors is to avoid this stock or if you have it in your portfolio then exit from it.