Vedanta Resources is one of the biggest fallers in the FTSE 100 on Tuesday morning, with shares in the Indian mining company falling 127p, or 5.6 per cent, to £22.06.
Here’s why:
Oct. 27 (Bloomberg) — Sesa Goa Ltd., India’s biggest iron- ore exporter, plunged the most in 21 months following a report that India’s Serious Fraud Investigation Office began an enquiry into its accounts and share price movements. Sesa Goa shares in Mumbai fell as much as 13 percent, the most since Jan. 21, 2008.
Sesa Goa Managing Director P. Mukherjee couldn’t be reached on his mobile phone and Sumanth Cidambi, a spokesman at parent Vedanta Resources Plc, declined to comment, saying a statement may be released today.
Vedanta, which is basically a holding company for a group of mining assets, controls 51 per cent of Sesa Goa with the rest listed on the Mumbai stock exchange. In the last fiscal year, Sesa (or iron ore) contributed a large chunk of group profits as this chart shows:
The reason for the investigation remains unclear although India’s Business Standard claims the SFIO is looking at eight years of financials and the movement of share prices.
Now, it’s worth noting that Vedanta acquired Sesa in April 2007 for almost $1bn. So the inquiry is likely to focus on events that pre-date its ownership. Nonetheless, today’s news highlights the risks of investigating in a company with a structure as complicated as Vedanta.
Alongside Sesa, Vedanta controls two copper operations Sterlite and KCM, an aluminium operation called Balco (through Sterlite) and also has a commercial power generation business.
Anyway, here’s this morning’s price action in pictorial form:
Update:
Statement from Sesa Goa just out:
Sesa Goa Limited (“Sesa” or the “Company”) wishes to clarify its position regarding certain statements made in the media which suggest that an inquiry has been initiated by the Serious Fraud Investigation Office (“SFIO”) with respect to the Company on certain alleged matters that appear to pertain to the period prior to its acquisition by Vedanta Resources plc.
As of 27 October 2009, the Company has not received any notification or communication from the SFIO on this matter and is currently not in a position to comment on such statements in the media. Sesa and its management are committed to the highest levels of corporate governance and transparency and will fully cooperate with any inquiry. Sesa continues to conduct its business in full compliance with all applicable laws and regulations.
Related link:
Record rise in iron ore output at Vedanta – FT