Shares of logistics service provider Gati have been pounded down in the last two days. The stock is down 3 per cent today, after a 15 per cent drop yesterday.

The massive sell-off in the stock may be on four counts. For one, worries about the company’s $22-million foreign currency convertible bonds (FCCBs) which is due for repayment in December 2016 weighed on the stock.

Bondholders have an option to convert these bonds into equity and the matter has been referred to the RBI for clarification on price clauses.

The company’s ability to repay the debt may be impacted, if the rupee continues to weaken. But conversion to equity at an offer price of Rs 38.5 per share, as preferred by bondholders, may lead to equity dilution of around 25 per cent, lowering earnings per share.

Two, investors may possibly be worried about the share pledge by Gati's promoters. The quantum of pledge by the company's promoters, which was on a downtrend from the March 2013 high, has increased in the June quarter. About 57.8 per cent of the promoters' holding in Gati were pledged at the end of the June quarter, up from 50.5 per cent in the March quarter.

Three, the company’s June quarter results came in lower than expectations. Profits dropped by nearly 32 per cent year-on-year due to higher employee expenses, interest and depreciation costs.

Finally, the company’s rail segment suffered after losing a tender bid in the west-east corridor, where it was a dominant player. Revenue loss in the June quarter was to the tune of around Rs 10 crore, about 2.5 per cent of the total quarterly revenue.

Gati’s e-commerce segment has however been doubling every year. Being a high margin business , the company expects this segment to lift its overall revenue and profit margin in the long term.

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