Hero MotoCorp Limited shares closed 3.24 percent lower at Rs 3,100 on August 1. The drop comes after the Enforcement Directorate (ED) conducted raids at the residence of Pawan Munjal, Chairman of Hero MotoCorp, after taking cognisance of a Directorate of Revenue Intelligence (DRI) case, CNBC TV-18 reported on August 1.
Recently, the Directorate of Revenue Intelligence (DRI) apprehended a close associate of Pawan Munjal for carrying undeclared foreign currency. Sources told CNBC-TV18 that a Prevention of Money Laundering Act (PMLA) case has been registered against Munjal.
"The development is certainly a blow for the company. It is a corporate governance issue as promoter is himself charged," Varun Baxi, an analyst at Nirmal Bang told Moneycontrol. "I feel the stock will remain under pressure in the coming days. The company is anyway the weakest among 2-3 wheeler companies." As for the Q1 results, Baxi said that results shall remain unaffected.
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Moneycontrol reported on June 15 that Hero Motocorp, a leading domestic automobile company, was under the scrutiny of the government, with the Ministry of Corporate Affairs (MCA) initiating an investigation against it.
The MCA's probe comes in response to a previous investigation conducted by the Income Tax department into specific transactions undertaken by Hero Motocorp.
On June 17, Hero MotoCorp made an official statement to the stock exchanges confirming that they have been contacted by the ministry, which is seeking specific information from the company.
In a previous development, in March last year, the Income Tax department had collected evidence that indicated Hero MotoCorp's involvement in various financial irregularities. These included the booking of bogus purchases, significant unaccounted cash expenditures, and obtaining accommodation entries, which altogether amounted to over Rs 1,000 crore.
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