Reliance Capital shares lost more than 6% during intraday trades on Thursday to fall to its lowest level in more than 15 years following the resignation by its auditor Price Waterhouse & Co.
The stock took a beating with the entire Anil Dhirubhai Ambani Group (ADAG) companies also losing significant ground on Thursday. Shares of Reliance Capital touched a low of ₹82 on Thursday, which is the lowest since November 25, 2003 when it touched ₹83.24. Incidentally, the shares have lost nearly 64% in the current calendar year when the benchmark Sensex has gained a little over 10%.
“The group has been passing through tough times in view of the high debt or leverage that appears on the group companies' balance sheet,” said Arun Kejriwal of Kejriwal Research and Investment Services.
“Though they have liquidated some debt, concerns remain on further pruning of the debt from the balance sheet. There is also a concern that after this debt is settled through liquidation of assets whether there will be enough income generation to keep the group companies going,” he added.
Meanwhile, PWC, in a letter to Reliance Capital on June 11, said that “as part of ongoing audit for 2018-19, we noted certain observations/transactions which in our assessment might, if not resolved satisfactorily, be significant, material and substantive to the financial statements.”
“We did not receive substantive/satisfactory responses to our queries in light of our observations,” stated the letter.
Apart from Reliance Capital, ADAG entities such as Reliance Home Finance and Reliance Communications touched the respective 52-week lows on Thursday.
Meanwhile, the ongoing liquidity crisis made investors bearish towards banking majors. Shares of Yes Bank lost nearly 13% or ₹17.45 to close at ₹117.20 after UBS cut its target price by 47% from the earlier ₹170 to ₹90. Indusind Bank also lost nearly 5% or ₹77.70 to close at ₹1,490.05.