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Shrugging off concerns over the arrest of two executives of DB Realty on Tuesday, the company stock soared 18.8 per cent on Wednesday to close at Rs 118.5 on the BSE.
Tuesday and Wednesday's trading has lifted the stock price by 40 per cent.
The company in a statement said late Tuesday that it supported the arrested executives and maintained that they had done nothing illegal.
DB realty has been on a steady decline since the company's co-promoter and Managing Director, Mr Shahid Balwa's name cropped up in the 2G telecom scandal followed by an arrest in February 2011.
The company has also witnessed a series of board exits since the scandal broke out, with quite a few private equity board representatives choosing to resign.
In February, one of the independent directors and Vice-Chairman of IL&FS Investment Managers, Mr Shahzaad Dalal, resigned from DB Realty's board. On Monday, Mr Sundaram Rajagopal, another Director, resigned. He was earlier a nominee director of Bollywood Mauritius Holdings, which was an investor in DB Realty at the time of filing for its IPO.
DB Realty was well-backed by private equity investors at the time of its IPO. As of December 2010, some of the prominent names such as IIRF (private equity fund of the IL&FS group), Walkinson Investments and Trinity Capital Eleven were among the top non-promoter stakeholders who entered the company before the IPO.
The cost of acquisition of equity shares (source red herring prospects) ranged from Rs 190 a share for firms such as IIRF Holdings and Trinity Capital to Rs 266 a share for Walkinson Investments.
Clearly, these firms, if they are still shareholders, are sitting on losses. The stock has shed three-fourth of its value from its IPO price of Rs 468.
The stock reached a low of Rs 83 on Monday's close after which buying interest intensified. Volumes jumped 10-fold between Monday and Wednesday.
While DB Realty has no direct stakes in the scam-hit telecom company Etisalat DB, the latter was a group company by way of common promoter holding. In its red herring prospects at the time of its IPO, DB Realty had outstanding guarantees for credit facilities to the tune of Rs 210 crore to Etisalat DB and has disclosed earlier years' transactions of loans and advances between itself and Etisalat DB.
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